I. Of the Interest of Money.
[Sidenote: INTROD.]
I introduce the subject of credit and debts, by giving a general idea of its extent. It comprehends the method of establishing a solid security for money borrowed; of extending the object of such security in proportion to circumstances; of supporting the credit of the borrowers, when over-stretched; and of preventing, as far as possible, the fatal consequences of a bankruptcy, when it can be no longer supported.
I shew how all mysteries relating to credit proceed from our ignorance only of its true nature; which is confidence established upon a visible and palpable fund of payment. I observe how delicate a thing credit is, and how gently it must be dealt with; how incompatible the forms of common law are with the discussion of questions which arise between merchants; how necessary it is to form a jurisprudence peculiar to trade, and to support it by manners more than by authority; and when credit is once set upon its true basis, how all aerial schemes, bubbles, and public bankruptcies will be avoided.
CHAP. I. Here I shew how impossible it is to establish credit by authority; how inseparably it is connected with liberty and independence; and still how compatible it may be with that supreme power which is vested in every government.
CHAP. II. The object of credit is money lent; the basis of loan is the payment of interest. If money be wanting, credit will die; consequently, there must be a method found for augmenting and diminishing the quantity of money in proportion to the demand for it. It is augmented, by converting land into paper-money; it is diminished, by relieving the land of the engagement upon it, and extinguishing the paper-money. This is no more than a contrivance for turning into a circulating value, which is the principal characteristic of money, the obligations of private men, which in all countries are considered to be of an equal value with any coin.
I here explain what is meant by money stagnated, and by money realized. Money, while it is employed in circulation, can carry no interest; the moment it lies idle to one man, were it but for a day, it may be worth interest to another, who willingly pays for the use of it, when he has occasion either to buy what he wants, or to pay what he owes. If no body be found who wants it, then it is said to stagnate in the hands of the proprietors. This denotes that circulation is full. He therefore desires to realize it; that is, to purchase with it some kind of income. For this purpose, if it be coin, he sends it to some place where coin is wanted. If it be paper, he demands of the debtor in the paper either to give him an interest for it, or to convert it into coin, which is the money of the world. Both are called realizing; and in proportion as money is realized, circulation diminishes.
Hence I conclude, that as the use of circulating money is to carry on alienation, so the use of stagnated money is to produce an interest; consequently, a perpetual interest is better than money, when it is not wanted for the use of circulation. If therefore, by the policy of a country, the capital of every perpetual interest can be immediately converted into money for the use of circulation, the inconvenience of capitals not demandable is removed; because although you cannot make the debtor pay, you can sell what he owes you to another, who will; and this equally suits your convenience.
CHAP. III. The simplicity of manners among the primitive christians, circumscribing very much the uses for money in circulation, a great quantity of the coin was consequently locked up. Paper money then was superfluous; because even coin itself so far exceeded all the uses of their circulation, that it was considered in the light of jewels and plate with us.
Taking interest for it, when lent, appeared to them as unreasonable, as if a lady, in these times, were to ask a price for lending her jewels to a friend.
However, as money was necessary on many occasions to those who had none locked up, the Jews, who have always despised land-property, made a trade of lending; and this drew an odium upon the practice. I can ascribe it to no other cause. Our manners are totally changed; and Christians lend money at interest as well as Jews. Neither trade, industry, or credit, can subsist without it; and as money cannot be lent, without allowing interest to be taken, interest is become the basis of the whole system of credit, and comes to be examined in the following chapters.
CHAP. IV. Before industry was established, the calls for money to borrow were few, and chiefly confined to Princes in time of war, and prodigal proprietors of land in time of peace. Their demands were urgent, and the interest they paid was in proportion. The lenders possessed but a small part of the coin of the country; because the bulk of the people locked up all they could. Those who hoarded, would not lend; and this greatly diminished the fund of borrowing: besides, Princes and prodigals had no sooner spent the money borrowed, than it fell again into the hands of those who hoarded; and the lenders found, no doubt, great difficulties in procuring fresh supplies.
When industry and trade brought money out of its repositories, when the necessity of permitting interest appeared evident to the church, the coin then began to make its appearance, and was ready to be lent. This opened a market for money. The price of money is the rate of interest. At this market, the borrowers and lenders appear in competition among themselves, according to circumstances. If more money is demanded to be borrowed than is offered to be lent, the competition takes place among the borrowers, and interest rises. If more is offered to be lent than is demanded to be borrowed, interest falls. Those who borrow money may be divided into two classes, viz. those who intend to spend it, and those who intend to trade with it.
When more money is to be lent than the first class demands, the rate of interest will be regulated by what merchants can give for it: when there is less, it will rise to what the prodigals will give for it.
But this first class must have good credit, or their borrowing will be cut off. When therefore a statesman finds, that the borrowing of such people hurts the commercial interest of his country, by keeping interest high, he should weaken their credit, by tying up their lands by entails. When their borrowing becomes necessary for the encouragement of industry, and for bringing all the money there is into circulation, then their credit should be enlarged, by promoting an expeditious sale of every branch of their property.
CHAP. V. Thus, without the aid of law, the interest of money is regulated by demand. But a state must not totally overlook the interest of the class who spend more than their incomes. It would be inhuman to throw them into the jaws of usurers. Statutes therefore prevent interest from rising above a certain rate. This preserves them, and renders the dissipation of their fortunes more gradual.
But although a statesman has it in his power to guard his people against the oppression of usury, by preventing the rate of money from rising above the ordinary standard of demand, he cannot equally force it down below this standard, even although the interests of trade should require it: because if the monied men can lend their capitals abroad, at a higher interest than they can procure for them at home, they will distress the landed interest, by demanding what they owe, and all the money will be sent abroad, as was the case in Scotland in 1762.
This was not the case a hundred years ago. No money then could be lent abroad by Englishmen; because those who would give high interest had no credit. Thus government could bring it down at will; monied men were forced to consent; and the price of land rose in proportion as interest fell.
As it is the extravagance of men of property which raises the rate of money above what is consistent with the interest of trade, the expedients to bring it down, are, 1. To circumscribe borrowing by the prodigal: 2. To suspend borrowing by the state: and 3. To throw as much public money as possible into the market, by paying off debts. When a statesman has by such measures brought the rate of money considerably below the legal price, he may, by a new statute, prevent its rising again so high as formerly; but still he must keep in his eye the rate of money, and state of credit in rival nations, in order to avoid the inconveniences already mentioned.
CHAP. VI. If Great Britain were to regulate the rate of money below what the fluctuations of demand are commonly found to carry it, then in time of war, as soon as demand, which can be subject to no statute, got up to the high standard, the whole landed interest would be torn to pieces by their creditors: for the debtors could not borrow from one to pay another, because no man would give them credit. This would put an end to all their expence; the funds which supply it at present (the land-rents) would be carried off by creditors; and all the industrious who serve such proprietors of land would suffer considerably for want of employment. The conclusion which the generality of people would draw from this phænomenon would be, that high interest, instead of being hurtful, is advantageous to trade.
CHAP. VII. Hence we may conclude, that low interest is principally advantageous for carrying on foreign commerce, and that the best method to keep it low, is to keep circulation full, by facilitating the melting down of property.
This expedient has been contrived by merchants in the establishment of banks upon mortgage; and there is a possibility that landed men, some centuries hence, may find out that they may imitate the example of traders, and contrive the means of borrowing cheaper than they can do at present.
Were a particular nation to carry such expedients into execution with success, it would have the effect of bringing down the rate of money every where. This would sink the general average of the whole, but never would prevent the operation of those principles by which it had been brought down; and the most intelligent nations would still have the same advantages as before, of keeping their interest low relatively to their neighbours, which is the great desideratum for the support of public credit, as well as of foreign trade.
CHAP. VIII. But although it is of very great advantage to trade to have interest low, we cannot judge of the prosperity of trade from this circumstance alone.
That nation gains the most upon her trade who draws the greatest balance from the rest of the world. Now the balance cannot be judged of by the rate of interest; because this depends more upon manners and policy than upon the state of industry. Industry must be supported by superior dexterity, natural advantages, and promptitude of payments, as well as by low interest. Prompt payment alone, is of more consequence to the industrious populace, than a small difference upon the rate of interest. That encourages the whole class of manufacturers. Low interest is principally an advantage to the merchants who are obliged to employ credit for collecting their work; and merchants themselves who trade upon credit, often gain more by quick returns than what will compensate a considerable difference in the rate of interest. Low interest may more properly be called the barometer of public credit than of foreign commerce.
CHAP. IX. From what has been said, I conclude, that the rate of interest does not sink as wealth increases; because it is influenced by many circumstances, which do not depend upon opulence. It depends upon the spirit and manners of a people, and will fluctuate with them.
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II. Of Banks.
CHAP. I. Having deduced the principles which regulate the rate of interest, I proceed to investigate those which influence domestic circulation; and as banks are the great engine by which circulation is carried on, in tracing the nature of banks we shall fully understand its policy and principles.
Banks either circulate notes, or transfer credit written in their books: the first are called banks of circulation; the latter banks of deposit.
All banks are founded on credit, and according to the nature of their institution, I may divide the credit they are built on into three kinds, viz. private, mercantile, and public.
Private credit is when the ground of confidence is real property, pledged for the security of the loan.
Mercantile credit is when the cause of confidence is in the trading stock, abilities, integrity, and good fortune of the person who obtains it.
Public credit every one understands. It is when the ground of confidence is a fund secured by public faith, in favour of the creditors, for the interest and capital due, which last however is never exigible from the state.
Private credit is the most solid of the three; mercantile credit is the most precarious; and public credit depends entirely upon the maxims of every government with regard to public faith.
It is the object of confidence, not the quality of the person obtaining credit, which determines the nature of the credit. A merchant may grant bond on the credit of his lands; a landed man’s bill, as member of a mercantile company, may only affect his stock in trade, and a Prince may pledge a province for a sum of money.
The debts of a state, and the bills of merchants, are more easily transferred than private securities.
Public and mercantile credit stand upon a more precarious bottom than private security. A suspicion of insolvency will shake the two former; real insolvency only will destroy the latter.
These are some of the peculiarities which characterize the differences between the three kinds of credit. The justness of the distinctions I have made appear from them, and from other circumstances mentioned in this chapter; and the utility of such distinctions will appear from their application as we proceed.
CHAP. II. To establish private credit, on the most solid and extensive bottom, the effects of debtors should be rendred of a ready conversion into money; the sale of lands should be rendred easy and expeditious; no entails or cloggs by mortgage and the like, should be allowed; debts upon possessions ought to be registred, and those due to banks (the great public debtors) should always be considered in a most favourable light.
CHAP. III. Banks of circulation upon private credit, are of great use in the infancy of industry. In countries where it is only taking root, the greatest obstruction it meets with is a scarcity of money. When money is scarce, payments are ill made; and when the uses for money increase, if money be not made to augment in proportion, alienation will cease to go on, and payments will daily be more precarious. This is so evident that I shall not insist upon it.
Now as every individual in a state does, less or more, support industry by consuming its produce, money must be provided for every one in proportion to the value of his property. This opens at once the principle of banks upon private credit.
He who has money will, every where, willingly lend to every one who can give good security for it; and the obligation granted by the borrower is considered by the lender as better to him than the money he lends. Before the establishment of banks, such loans were made in coin; but as people discovered that a good obligation was as good as coin, they discovered also, that when obligations could be made to circulate, they might supply its place.
For this purpose, banks found out an expedient of dividing obligations secured upon property into small parts of the capital sum; and by delivering them back to the borrower, with an obligation to pay them in coin to the bearer on demand, they constituted themselves debtors to the public for every note. The consequence of this was, that the coin of the country became less useful in circulation; and as the banks demanded it, and even gave premiums for obtaining it, it came into their hands, and served the purpose of changing notes; that is, of subdividing the sums mentioned in them, into the lowest denominations of the money of the country.
There is not a nation in Europe so ignorant as not to feel the use of this policy; but there are few who have discovered how to establish the confidence of the public in this general debtor, the bank. The reason is, that people imagine a bank should at all times be able to turn all their paper into coin. Were this possible to be done, where would be the use of banks? How could they multiply money?
From this short exposition, we may understand the difference between banks upon private, mercantile, and public credit. The first lend upon the security of possessions; the second, upon bills of exchange, which is called discounting; the third, upon the security of the public funds.
CHAP. IV. A scarcity of money only being found to stop the progress of industry, and thereby to circumscribe the gains of merchants who supply consumption; and they perceiving that men of property become bad customers, more from the impossibility of making payments than for want of an inclination to consume, joined together, and formed a considerable stock which they exposed to the eyes of the public. This gave them credit, and every one who had money to lend was fond of placing it in their hands. Other people who wanted to borrow, applied to them for money. Their answer was, we have no coin; but if you want money for any purpose, we can assist you in credit, if you will give us security upon your estate. Here is, said they, a note of ours, which any body will take from you as payment for what you want. This was the same thing to the man who wanted money for a particular use, as if they had given him coin; and as such demands became frequent, the notes were printed, and insensibly banking was established.
States perceiving the abuse which might follow, were every one allowed to issue paper in this manner, judged it proper to erect companies, who lent them considerable sums as a security for their faith to the public; and the superior credit of such companies drew the confidence of the public, and circumscribed the dealings of individuals. Thus the trade of Lombards, who had formerly supported circulation by their bills of exchange payable to order, received a farther extension by the establishment of banks, who, by issuing notes payable to bearer, rendred them, in all commercial countries, every bit as useful as any coin.
Banks once established, regulations became necessary; and of these the first and fundamental one, was, to issue no notes but upon good security. If it be asked, what security should be taken? The answer is, the best those who want credit can give. In a country where trade and industry are little known, but where a taste for refinement is taking place, demand must be encouraged, in order to augment the supply. And as this demand for consumption should, naturally, come from men of landed property; the bank, therefore, should first resolve to issue notes upon the security of that kind of property.
When industry becomes more extended, and when trade becomes more secure, from the solidity of mercantile funds, banks may then begin to discount bills of exchange, and as this branch of credit enlarges, the bank will by degrees participate of the nature of those secured upon mercantile credit.
When public credit, again, is well established, they will lend upon government securities, pledged in their hands, and thus become founded upon public credit.
According therefore to the principal object of their trade, they are said to stand upon private, mercantile, or public credit.
When a proprietor of lands gives his bond to a bank, it should be understood, that as long as he regularly pays the interest of the money borrowed, the bank is not to demand the capital.
For this bond they give notes, which are considered as ready money, and therefore carry no interest. So the profit of the bank is to receive interest for what they lend, and to pay none for what they owe.
What they owe is the paper they issue. They owe this to the public; and the security which the public has, is the security which the bank received from the person who borrowed from them.
Hence the solidity of banks upon mortgage. Their notes become money, and this money is secured upon the whole stock of the bank, and the whole property engaged to them.
But as the stock of the bank is of a determinate value, and as the notes they issue may very far exceed it, the credit of a bank will be precarious, unless the value of the securities upon which they lend, be equal to all the notes in circulation. It will also be precarious in proportion as the securities themselves are so. Hence the interest the public has to take care that banks give credit upon nothing but the best security.
CHAP. V. A bank, therefore, which lays down a rule to lend upon the mortgage of solid property only, would destroy confidence, if it should launch out in giving credit to those who have no solid property to pledge.
CHAP. VI. The use of all banks is to support domestic circulation: this is two-fold; that carried on by consumers, and that carried on by traders and manufacturers, who supply consumption.
The circulation carried on among the first is in proportion to their income, and their credit should be in proportion to the funds which produce it. The circulation carried on by the last is in proportion to the demand for their industry.
If a bank be established on the credit of solid funds, it is very plain that they cannot support the circulation of manufacturers and dealers upon the same terms, or in the same way they do that of proprietors. They may indeed discount bills; but they cannot give a permanent credit upon a security which is not founded upon property. This opens a new combination.
Trade and industry are dispersed through many hands, and if the stock of those who carry them on be compared with what is necessary for that purpose, it will appear very small. What is deficient in stock must be made up to them in credit; and this will be in proportion to their integrity, capacity, and good fortune. A frail security for paper, which is to become the money of a nation! Such securities must either be rejected by every bank whatever, or the whole fabric will tumble into ruin. But this subaltern class of dealers may have recourse to merchants, whose wealth and funds are solid and extensive. To these a bank may give credit, and they again, in their dealings with the other class, may indemnify themselves of all the risk they run, by profits in proportion to it.
This class of merchants I call exchangers; because they deal principally by bills of exchange in the credits they give, which are of the greatest advantage to an infant trade and a growing industry.
CHAP. VII. When banks were first established, there was no money known but coin, and many there still are, who do not clearly see how money can possibly be made of any thing but metal. The scarcity of coin raised the rate of interest, and when banks began to lend their paper, they exacted the same interest as if they had been lending coin. Hence they were obliged to promise payment of their notes, in coin, upon demand. In consequence of this, the policy of circulation proceeds upon the supposition, that bank notes are equal to coin in every respect; and when any interruption happens in the ready exchanging them at the bank, all runs into confusion. I shall afterwards shew how this might be prevented.
While a country has a balance of trade, either at par or in her favour, no body has occasion for coin, except to reduce bank notes to their lowest denomination of money. But when a balance is due to other nations which must be paid in gold and silver, every one who wants coin for that purpose, runs to the banks, which are obliged to pay in it, and then they are thrown into distress. Hence we may conclude, that a bank taking upon itself the obligation of paying in coin, without carrying its policy farther than the banking trade, cannot stand its ground in a country which owes, upon an average, a balance to other nations. This opens a new and a most curious combination.
CHAP. VIII. In the mechanical operations of trade, when they are not combined upon principles, and directed by a superior policy, every balance due from one nation to another upon the whole of their reciprocal payments, that is, in consequence of their debts and expences abroad, as well as in the course of their mercantile operations, must be paid in the metals.
For transacting this balance, there is a set of merchants who deal in the business of exchange. Every debtor to another country is supposed to have value in his hands for it, which he converts into bank-paper; with this he buys a bill of exchange, drawn upon the place where he is debtor, and the exchanger who sells it, demands coin of the bank, which he sends off for payment of his bills. If during this operation the bank should stand with its hands across, and only think of expedients to provide coin, it is evident, that if specie should totally fail in the country, trade must be at an end, and the credit of the bank would be undone: for no body will enter into every combination necessary to discover the impossibility of converting the whole paper currency of a nation into gold and silver. Thus a bank which cannot pay in coin, will be supposed to be ruined, though in reality it may be worth half the property of the state.
Is it not then of great consequence to banks, and to a nation, that the principles of their trade, and the security of their paper, should be well understood? And is it not wonderful, that they themselves have not made evident a thing which they must understand far better than any one who has not had their experience?
CHAP. IX. When a country gentleman owes money in town, beyond what his rents can pay, does he not borrow from some body who has money? Does not this borrowing prevent his lands and his houses from being torn to pieces by those who have a right to demand money of him? Would he not be laughed at, if he were to delay pledging a part of his property, in order to secure the whole?
The case is just the same with banks. They owe a sum of coin equal to all the paper they have in circulation. In this they represent the country gentleman. Foreign nations demand payment from them in coin; because it is the same thing whether this demand be made directly on the bank, or on those who can demand it of the bank. Such nations represent the town. Must not then the bank borrow upon the credit of the securities pledged at the time they issued their notes, and which to them represent the gentleman’s lands? And can they borrow from any but those who have money? Their own country can have none to lend, while they owe a balance; they must therefore borrow from other nations, and transfer what they borrow to their creditors abroad.
Hence I conclude, that as nations which have coin pay what they owe with it, and thereby diminish its quantity; so nations whose money is their land, must pay in land, to the diminution of that species of property: and as a man who owes a thousand pounds upon his estate is only proprietor of it for the remaining value; in like manner, a country which pays an annual interest to other nations, is only proprietor of what remains.
CHAP. X. If the country gentleman, who is pushed by his creditors for money, which he cannot expect to draw from his rents as they become due, should borrow, for a few weeks, from one who, after that time, will have occasion for his money himself, he will be put to all the expence of giving security for it, and at the end of that short time, he will be at as great a loss as ever to find money to reimburse the man who had lent it him. This represents the expedient used by banks to obtain temporary credits, instead of a permanent loan upon a regular interest.
CHAP. XI. When trade goes on well, and produces a regular balance in favour of a country, the trade of banking is easy, and few employments require less capacity. But when the balance begins to be unfavourable, and when, in self-defence, they are obliged to deal in exchange, the case is different.
Whatever balance is due abroad must be paid by the banks, as has been said, either in coin or in credit. As long as they pay in coin, the business of paying the balance is left to exchangers, who conduct the operation. But whenever banks borrow abroad, upon a permanent loan, and thereby acquire a fund to draw upon, the business of exchange falls naturally into their hands, and they may profit of it according to circumstances. In this case, not one shilling of coin can go out of the country, in the way of payment; because there will be a loss to any one who sends it away, when he can pay cheaper by a bill.
CHAP. XII. But the most complicated combinations arise from the consequences of a wrong balance on the state of domestic circulation. I hope this matter will be more easily comprehended, from the short recapitulation I am now to give of it, after all that has been said upon the doctrine of taxes, and of the difficulty of paying them, when money is sent abroad.
Money is the instrument of alienation; and when this instrument is taken away, alienation must cease. Now, it is a matter of indifference as to circulation, whether money be rendered scarce by being sent out of the country by the state in time of war, or by the subjects who owe it to strangers in time of peace. A determinate quantity of money is requisite for domestic circulation. In whatever way this comes to be diminished, it is the duty and interest of banks to fill up the void as fast as possible, by readily furnishing credit at all times to those who can give security for what they demand. If banks, by paying balances, shall have exhausted their fund of coin, the fault is their own. Why did they not in time provide the necessary funds abroad? But in whatever manner they pay the balance, the consequence is, to take a sum of money equal to it out of domestic circulation; and this cannot be replaced but by more money lent by them upon new securities. If an ill grounded fear should at such a time engage them to refuse credit, when demanded, the country will be in a worse situation than if banks had never been established, from the sudden diminution of money, which, without that establishment, never could have happened.
But if banks would consider the whole foreign balance as immediately their own debt (and it is so, when they are obliged to pay it) they would provide the easiest method of acquitting it: since none of the expence incurred can fall upon them, in any proportion to the gain they make, in receiving interest for all they lend, and in paying none for what they owe within the sphere of their own circulation.
CHAP. XIII. Whatever contracts circulation, hurts a bank, and offers no relief to it with respect to the payment of balances. If they borrow money at home, they cut off the branch they stand upon, unless they continue at the same time to give credit to all who demand to borrow upon good security. This last combination was omitted in the chapter I am now recapitulating; because of the multiplicity of those I was obliged to introduce, in order to demonstrate how hurtful it is for banks voluntarily to diminish the circulation of the country where they are established. I shall therefore bring it in here, and refer to the chapter for the other combinations which cannot be abridged.
Did banks, upon mortgage, make it a rule to borrow all the money offered to them, at a small deduction from the common interest, while at the same time they continued to lend as formerly to every person of good credit; the consequence in a little time would be, that they would become the absolute center of all borrowing and lending, and the greatest part of the expence of drawing securities would be saved.
Every person who had money to lend, would lend it to the bank; and every one who had money to borrow, would borrow it of the bank. Upon these two operations, the difference of interest paid, and received, would more than balance the additional expence of so great a detail. But then indeed some new law would be necessary to facilitate securities. The clogs laid upon solid property oblige the bank to insist upon conditions, which put it out of the power of many persons of good credit to borrow from them. But I do not propose plans: my aim is confined to principles; and from those I have mentioned a new clause in bank notes would arise, viz. to pay in coin, or by a transfer of interest at a determinate rate, at the option of the bearer, not of the bank.
CHAP. XIV. This would be an optional clause, very different from that lately introduced into Scotland, where the option of paying interest was left to the bank. This has since been wisely suppressed; because it proved a heavy clog upon circulation, and enabled the bank to avoid doing what their own interest, and that of the nation, required of them, viz. the ready payment of all balances against the country. But in suppressing optional clauses, government should facilitate the means of paying balances, and of providing coin. This is done by establishing and supporting the credit of the banks, in proportion to the solidity and extent of their funds. An example of this nature occurred in Ireland, in April 1760, when the parliament interested itself directly in the support of the credit of some private bankers. A mint also is necessary; or if this should be judged improper or superfluous, some assistance at least should be given in conveying coin from the place of its fabrication.
CHAP. XV. All branches of policy are brought to perfection by degrees, when, instead of being established at once on sound principles, they introduce themselves mechanically, by custom and practice only. When therefore a national bank is not found to answer all the purposes expected from it, private people imitate their plan, and fill up the void. Thus in Scotland, when the banks of Edinburgh did not sufficiently support circulation in the more distant parts of the country, private banking companies were erected, and degenerated into a great abuse. Every one issued notes payable to bearer. Thus the public was filled with paper money, the credit of which was quite unknown to many, who were however forced to receive it.
Whatever is payable to bearer, is payable to the public; and no doubt the public has a good right to prevent the issuing of notes by any but such as it has confidence in. When a note is payable to order, every one who circulates it is responsible for the value; but when it is payable to bearer, there is no recourse upon any but the first grantor of the obligation. Such regulations therefore should be made in this respect as may give a solidity to the paper, facilitate a general circulation, and prevent the establishment of a currency confined to particular districts within the same country, which tends to introduce a course of exchange from one town to another. This would be the case, were the circulation of every county carried on by the county bank. A communication, therefore, of interest between the banks of a country is requisite, or else the obligation to pay should not be confined to the place where the bank is established.
CHAP. XVI. Here I resume the principles I have deduced, in a short sketch of a general plan of regulations for a bank of circulation.
CHAP. XVII. If proper regulations upon the banking trade should be found inconsistent with the laws and manners of a people, which require a more extensive liberty to every one to carry on what commerce he thinks fit, I think it is reasonable that every company of merchants who issue paper, payable to bearer, without the sanction of government, should be obliged to subject their books to some kind of public inspection, that it might be seen whether the credit they grant to individuals be of a sufficient solidity to answer for the notes they circulate.
CHAP. XVIII. The numberless distresses of the Scots banks at the end of last war, made it necessary to show, in a particular chapter, what the consequences might have been, had the banks at that time totally withdrawn their credits, and given up business. This step would, 1_mo_, have cut off their whole profits of banking. 2_do_, It would have ruined the whole class of exchangers; and with them, 3_tio_, the whole trade and manufactures of Scotland.
CHAP. XIX. Here I take a farther step into those intricate combinations. I now shew how the whole obligation, both of paying in coin, and discharging foreign balances, may be taken off from those who administer a national bank. Their notes are proposed to be paid by a proportional transfer of interest. All interest due by banks on that account, and to banks for credit given, is proposed to be paid in coin at certain terms. Those who have occasion for coin are to buy it at the mint: but this coin is entirely calculated for domestic circulation; and therefore a very moderate quantity of it will be necessary. And for the payment of all sums due to foreign nations, I lay it upon government, according to the plan proposed in the 5th chapter, upon exchange.
Thus the whole policy of circulation is divided into three distinct branches:
1_mo_, The melting down of property, and keeping circulation full at all times. This is the business of banks.
2_do_, The providing of coin is the business of mints.
3_tio_, The granting bills on foreign parts, for value in the national currency, is the business of the state.
CHAP. XX. The objection to this doctrine is, that if notes are not payable in coin, they cease to be of value. The answer is short. The use of paper money is to keep reckonings of value between people who have property; the use of coin is to avoid giving credit to people who have none.
The value of the paper in the country is ascertained by the value of the interest which is paid for it in coin; and by not paying the capitals in coin, you prevent its being carried off without necessity, whenever a balance becomes due; which balance might be paid by the means of credit.
CHAP. XXI. I shew, by many arguments, (afterwards employed in the 10th chapter, upon public credit, and which render this combination more simple than I should otherwise have been able to make it in this place) that the return of a favourable balance of trade will clear the bank of all the foreign debts contracted by it, for the relief of the country; as a like favourable balance on the trade of Great Britain has the effect of setting that nation free from a proportional part of the money due to strangers. In this case, the favourable balance is incorporated in the public funds due to natives: in the other case, it is incorporated with the stock of the bank securities, and enables them to relieve that part of them which was engaged for the interest paid out of the country.
CHAP. XXII. The constitution of the bank of England differs essentially in some particulars from that of banks upon mortgage, and private credit. It is not so much calculated for multiplying the currency, by melting down private property, as for facilitating the circulation of the trade of London, and exchequer of Great Britain.
The grounds of confidence upon which the notes of this company stand are very great.
1_mo_, A capital of eleven millions sterling, for which they are creditors to the nation.
2_do_, A sum of credit-cash at all times in their hand, of about eleven millions more.
3_tio_, The bills of exchange of all the great merchants of Europe, which they discount.
4_to_, When they issue paper to government upon the faith of taxes, or circulate exchequer bills, they have the security of the public faith for the short advance of a few months.
This bank, I have said, is more useful for promoting circulation than for augmenting it. It has however lent its assistance in this respect on very critical occasions. It has circulated exchequer bills; and tallies, which, from discredit at the time, were as ill calculated to supply the use of money, as lands or houses are, from their unwieldy nature. The great advantage the public reaped from such operations, abundantly shew the utility of banks, which are calculated for that very purpose.
The principal operations of this bank are, to receive and pay away the greatest part of all the national revenue, expences, and debts; to discount bills of exchange payable at London, and to supply the country with coin.
The demand of London for subsistence and manufactures from the country of England is so great, that the whole amount of what is sent up to that city, for taxes, and for land-rents there expended by the proprietors, does not compensate it. From which it follows, that by the bank’s not giving credit upon private securities, the whole of their paper is in a manner confined to the capital; and if any part of that paper casually goes into the country, it quickly returns, in payment of what would otherwise be remitted in bills. So that paper circulation in the country of England is very inconsiderable, when compared with the coin.
The intention of this chapter is to examine and compare the principles of the two species of banking, and to point out their several consequences as to circulation; from which I am led to think, that if banks of circulation were to be established in the country towns of note in England, they would greatly promote industry every where, and occasion no inconvenience from their contrast with the national bank.
CHAP. XXIII. After deducing the principles upon which the solidity of paper money is established, I proceed to point out the bad consequences of issuing bank-notes upon a precarious security. The bank established in France by Mr. Law, and the fatal catastrophe it brought upon that nation, furnish excellent matter for illustrating the doctrine of paper credit.
The late King of France left, at his death, a debt upon his kingdom of 142 millions sterling; the coin being at 28 livres the marc of silver.
CHAP. XXIV. In a few months after his death, the debt was reduced to 100 millions, by the turn of a wheel. The coin was put at 40 livres the marc. But as the hundred millions sterling, in intrinsic value, after the reduction, contained as many livres in verbal denomination, as the hundred and forty millions did before, the greatest inconvenience discovered by the people was confined to the necessity imposed upon them to sell their old coin at the King’s price.
At this time Law set up his bank, and without doubt assisted people in that respect, with very great benefit to himself.
CHAP. XXV. He divided the capital stock of the bank into 1200 shares, of 5000 livres each (the livre at this time was exactly a shilling sterling); and the purport of the notes he issued was, that payment should be made, at all times, in livres of the same intrinsic value.
This bank was established on the principles of the Scots banks, and lent sums upon every species of good security. The consequence was, that in less than three years, France, from being in the most miserable situation for want of money, credit, consumption, and industry, was raised, as by magic, to the greatest affluence. The reason was plain: there wanted nothing but an instrument to set all the inhabitants to work. This Law gave them in a moment; and their own work was the cause of the affluence which astonished them.
This effect was produced by an inconsiderable sum of notes: they did not exceed three millions sterling when Law gave up his bank. But credit and confidence were established by that small sum; and the notes brought out all the coin which had been formerly locked up. It is not a great quantity of money, but an exact proportion of it, according to demand, which supports trade and industry. That proportion may be sustained by the means of banks, but by no other expedient whatever.
CHAP. XXVI. Law’s bank was no sooner established, than he sought to enlarge his bottom. He found a trading company ruined in their affairs, though intitled to great privileges. He found also large sums of public state billets circulating at great discredit, from an ill paid interest. He got a grant of the company to himself and associates. He opened a subscription for 200,000 shares, of 500 livres each. He took payment in those discredited obligations; and when he had got the state billets, (given in at subscribing) he engaged the Regent to promise punctual payment of the interest. This was no sooner done, than the discredited paper, which was become an action, or a share, as we have called it, only by being subscribed for to Mr. Law, rose above par. The nation cried out, a Miracle! Law was a saviour, in the eyes of some, a conjuror in the opinion of others.
His credit and his capacity for conducting the greatest undertaking within the power of numbers and computation, being established, inspired the Duke of Orleans with a scheme of unbounded ambition, which, in favour of many who have never rightly comprehended the nature of it, I have been at very great pains to trace, in the eight following chapters. And as a recapitulation is useful to assemble ideas within a small compass, which have been dispersed through many combinations in the work itself, I shall here, in a few lines, give a general idea of the whole plan.
The Regent perceiving the use of paper money, well secured on solid property, resolved to take the bank into his own hands, in order to issue paper sufficient to pay off the whole debt of France. Now paper issued for paying debts is secured upon no fund at all. It is the same as if it were issued for payment of meat and drink. The whole security therefore was his own word.
But the difficulty was to prevent this paper from instantly returning upon the bank; because it far exceeded all the uses of circulation, and, consequently, could not be suspended in it.
The expedient fallen upon was to raise the value of the actions of Law’s company, (which by the subsequent incorporation of new privileges were multiplied beyond 600 000) to a great height, by promising great dividends upon them. The company accordingly promised a dividend of 200 livres a year, upon a capital which was originally worth no more than 500 livres.
The great quantity of paper money dispersed had sunk the rate of interest to 2 per cent. The dividend, therefore, combined with the rate of interest, carried the market price of the action to 10 000 livres. Here was a new fund provided as an outlet for all the bank notes paid to the creditors; and in proportion as they bought the actions from the Regent, or the company, whom I here consider as the same, the notes were to be cancelled.
By this operation all the debts of France were to be converted into actions of the company of the Indies, and were to share its fate. But then it must be remembred, that this company had in a manner the whole revenue of France in farm; and by a recapitulation of the different branches of their profits, their income amounted to eighty millions of livres a year. So that if matters had been well managed, had credit been supported by fair dealing, had no arbitrary acts of power, in tampering with denominations of coin and money, taken place, and had the Regent supported and encouraged the company; they in fact might have been able to pay more than all that was required of them; and the very diminution of the interest of the public debts, by the fall of money to 2 per cent. was, in effect, cutting off one half of the capital. So that if we suppose the total value of the 2000 millions of debt equal to 100 millions sterling, the debts of France, by this scheme, would have been reduced to an annuity of 2 per cent. on a 100 millions, or two millions sterling a year paid to the company, who then represented the creditors of the nation.
But the project was too great; the capacity of those who were in the management was too small, and the time was too short for bringing about so great a revolution: thus it failed; but in a way which suggests no reason to believe that it might not have been supported.
CHAP. XXXIV. The denomination of the paper was reduced to one half by an act of power: a man who, for example, had a bank note for 100_l._ had it reduced to 50_l._ This at once destroyed the whole credit of France. But it would have stood its ground, without doubt, had the Regent called the fifty pounds with which he paid such a note, one hundred pounds; although, if you abstract from the interests of debtors and creditors, which never were attended to, it was absolutely the same thing. The altering the denomination of paper implies, however, this additional injustice above that of altering the denomination of coin, that it changes the value of the paper in all cases; because it contains no other value than the denomination: whereas coin has a value independent of that, which no law can alter.
CHAP. XXXV. The form of a bank proposed for France, in this chapter, is pretty much the same with that mentioned in chap. 16; only here I have not even admitted the payment of the interest in coin, for fear that an act of power, by carrying off a few thousand louis d’ors on a present exigency, might totally ruin the credit of such a bank, and consequently draw ruin on the whole nation.
This bank is intended merely as an office for keeping accounts between people of property, and thereby of greatly increasing and supporting circulation.
CHAP. XXXVI. Having dismissed the subject of banks of circulation, I come next to those of deposit. Here I deduce the principles upon which the bank of Amsterdam is established.
This bank issues no paper, and grants credit upon no security but coin locked up in their vaults. Consequently, the ground of their credit is the faithful preservation of this coin. Were it at any time to be diminished below the value of the credits written in their books, the nature of the bank would be changed. Were the coin to be lent on good security, such a bank would then immediately become a bank of circulation upon mortgage; since it would be the same as if the credit had been at first granted upon that security. Were the coin disposed of for no value, the bank would be from that moment bankrupt in fact, although the secret might be kept for a long time.
CHAP. XXXVII. The intention of establishing a bank of this nature at Amsterdam was to fix the seat of trade in that city. The ordering all bills of exchange to be paid to the bank in coin, and the giving to the holders of the bills only a credit in bank for the value, was an effectual means of obliging the proprietors of that credit to carry on their trade in the place where their funds were established beyond a possibility of removing them, except by transferring them to others who, by accepting of the transfer, came under the same necessity. Were indeed trade to become incompatible with the situation of the city, as if an earthquake should fill up the port, then the bank would either be removed elsewhere, or the credit writ in their books would become of no more value than gold in an inaccessible mine. This regulation also prevented the circulation of bad coin; because when payment of bills was made to the bank, they took care that nothing but good coin should be received.
From these regulations it appears that money cannot be multiplied by banks of deposit; but on the other hand, it cannot be diminished by exportation, without the act of the bank; and the transfer of credit answers every use of coin in trade, and prevents also its waste in circulation.
CHAP. XXXVIII. Coin is liable to constant vicissitudes. Its denomination may be changed by an act of power, and its real weight may be diminished in circulation. But when it is locked up, all these inconveniences are prevented. Bank money, therefore, being the value of the coin locked up, is constantly the same: whereas all coin which circulates is liable to variations; consequently, these variations are relative to the coin which circulates, and not to the bank-money. The difference between the one and the other is called agio.
CHAP. XXXIX. Many have imagined the treasure of the bank of Amsterdam to be immense; because no body can ever take any thing from it, and that it is constantly receiving new augmentations: but the policy of the bank itself destroys this supposition, and shews plainly, that the sum locked up never can exceed what is absolutely necessary for circulating the trade of the city.
It is true, no person can go to the bank and demand to have the amount of his written credit paid him in coin. But were the written credits to exceed the uses found for them, the value of such bank-money would diminish; consequently, the value of the circulating coin would increase, which is the same thing. Now as this would prove a great discredit to the bank, they employ a set of cashiers or brokers to keep the balance even. Their business is to buy and sell bank credit with current coin, and to these the bank gives credit. When there is a demand for bank credit, the cashiers sell it for coin, and both parties going to the bank, a new credit is written, or the cashier’s credit is transferred to the buyer. When, on the other hand, coin is demanded for bank credit, the cashiers pay for it with coin which the bank lends them; and for their repayment, they transfer to the bank the credit they have bought with it. This needs a little explanation. Suppose one to have credit in bank for a thousand gilders, which he wants to send away in coin. He goes to the cashier and sells his thousand gilders of bank credit: the bank lends this thousand gilders to the cashier, and the man who sells the credit gets the coin, and makes a transfer of the credit in favour of the cashier. But as he owes this sum to the bank, he transfers this credit to the bank itself, in payment of the thousand gilders borrowed; and then the bank may expunge it, if they please, from their books; because it is due to themselves. Thus although no money can be demanded of the bank by one who has credit, they can give the money to a third party who does it for them.
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III. Of Exchange.
CHAP. I. Foreign circulation is carried on by bills of exchange.
When reciprocal debts are contracted by different countries, the creditors in both take payment at home for the bills they draw to the order of those who pay; and they again indorse the bills to their creditors abroad.
In this contract four parties concur: the domestic and foreign creditors; the domestic and foreign debtors. This operation can extend no farther than to the amount of reciprocal and equal debts; if there be a balance owing upon one side, this balance must be paid in value, either in money or merchandize. Now as a debt is much easier discharged by compensation than by payment, merchants endeavour to profit of this compensation; but as every one endeavours alike when there is a balance on one side, it operates upon the whole of the exchange, and every one must bear his share of the expence of paying it.
If London should owe a balance to the world, after compensating all that the world owes to her, every London-debtor to the world will wish to compensate; consequently, he will look out for one who is creditor to the world: but this search betrays the secret, and shews that he is the demander; upon which the other avails himself of his situation, and refuses to compensate without profit. Hence the secrecy said to be requisite in this branch of trade. It is requisite to the trader only, whose interest is concerned; because whatever one set of merchants in a place wish to conceal, another set have constantly an interest to divulge. The interest of the state consists in preserving an equality of profit and loss among them all; and in facilitating to them the paying and receiving the balances due upon the total of all their transactions. The loss of the nation is upon the balance due by the country; the expence of paying the balance, which is the price of exchange, is only a relative loss to some of her subjects, and a relative gain to others.
The attention, therefore, of a statesman in what regards exchange, is, 1_mo_, To take care that the true par between the value of the national money and the money of other nations, shall be as much as possible proportional to the quantity of metal contained in each.
2_do_, To remove domestic inconveniences in paying with the metals, or national coin, every unavoidable balance.
3_tio_, To hinder the expence of acquitting a small balance from occasioning a loss on the compensation of reciprocal debts.
And, 4_to_, When he finds an inconvenience in allowing the metals or coin to go out of the country, he must assist in having the balance paid in the way of credit.
CHAP. II. The best method for determining exactly the true and intrinsic value of the metals, coin, or money, in which the balance due to or from a foreign nation, is to be paid, is to compare the respective value of fine bullion with the respective denominations of the coin in the two places exchanging; and to state the difference only, as the price paid for the exchange. To render this more practicable, a proposal for rendring all mint-weights more determinate is set forth in a note.
CHAP. III. When upon the whole of a nation’s trade with the rest of the world, a balance is due, it must be paid, either in intrinsic value, which totally discharges it, or by giving security for it, and paying interest until the charge can be obtained. We consider in this chapter the methods of discharging it.
A statesman is the best judge when his people ought to pay with bullion, and when with credit. If he approves of their paying with bullion, that is, with gold and silver, he should render the exportation of the metals as easy as possible. If a duty be laid upon coinage, he need not be afraid that any one will send off the coin, as long as bullion can be found; and when this runs short, if he does not choose that his coin should go out, he must lend his assistance in paying with credit. If he finds it against his interest either to pay in one way or in the other, he must put a stop to the trade which creates the balance: for while such trade is permitted, he will find it beyond his power to prevent the payment of that balance in the most hurtful way possible to his country.
I here observe, that in countries unacquainted with trade, and in others where the whole external commerce is carried on by strangers, a good expedient for cutting off such hurtful branches of traffic is to lay all the restraints possible on the exportation of the metals, in order to promote the exportation of what the country can offer in return. But when trade and industry are established, these restrictions cease to be useful; because merchants then find a profit upon exporting domestic productions, which they never can have upon exporting an intrinsic value.
A statesman, therefore, should conduct his operations according to the situation of his country. If foreign trade be unprofitable, cut it off as much as possible, and lay every restraint upon the exportation of coin. If it be profitable, lay no restrictions on payments; because you are sure you will gain upon the whole. And if, in any particular case, you incline to keep your coin at home, mortgage your country, and pay with your credit.
If, when you are obliged to check foreign trade, and lay prohibitions on the exportation of coin, exchange is found to rise to a great height against you, yet will this exchange produce no national loss: it will be paid within the country by those who consume foreign commodities, to those who are at the trouble and expence of transacting the balance.
CHAP. IV. Here I demonstrate what before I had in a manner taken for granted, viz. that the price of exchange is neither a national loss, or a national gain; but whether it be favourable or unfavourable, it produces an instability in the profits upon trade, and should therefore be kept at par by all possible methods. I also shew how exchange is favourable to exportation, when the balance is against a country, and how the exchange is unfavourable in that respect in proportion as the balance is for that country: and as whatever exchange is gained by exporters is lost by importers, and vice versa, some have concluded, that an unfavourable balance does of itself destroy its own pernicious effects, and sets the balance even. I endeavour to disprove this proposition, by shewing how the importers are indemnified, as to their loss by the exchange, from the additional price they get for their foreign commodities at home; whereas the exporters cannot raise their prices abroad; because foreign competition will not permit them. So that in one case the wrong balance hurts the rich consumer at home, who can bear the loss; and in the other, the right balance hurts the poor manufacturer, who cannot. Hence I conclude, that it is greatly for the interest of a trading state to keep exchange, at all times, as nearly at par as possible.
That this is a practicable scheme, I prove by a matter of fact, and by an experiment made in France by a late minister; where, upon a certain occasion, the exchange having risen to a great height against France, he immediately brought it to par, by ordering bills upon Holland to be furnished at that rate, to those who should demand them; and by taking upon himself the expence of sending the money paid for such bills, to the place upon which they were drawn.
I observe, however, that such operations can only be recommended to statesmen who preside over the interests of flourishing trading nations; because in proportion as they are benefited by facilitating the payment of the casual balances due by them from time to time, in so far is a prodigal nation hurt, by facilitating the dissipation of their property, and by contriving a ready method of transferring it to foreigners.
CHAP. V. When a nation owes a balance, after all the payments they have been able to make, either in coin, bullion, bills, or merchandize, it is evident, that what remains can only be satisfied by obtaining credit for it, at the expence of mortgaging the country and paying interest for the remaining balance. When this, however, happens to be the case, it involves the nation-debtor in a multitude of expensive operations conducted by exchangers, who constantly find a profit in carrying them on, though at a very great loss to individuals within the country. To prevent this inconvenience, I propose, that the statesman should take upon himself the obtaining of credit abroad, for the balance due by the country he governs; and that the expence incurred by this operation should be defrayed by the public, whereby every individual within the state will contribute his share towards maintaining an uniformity in the profits upon trade, and supporting the stability of commerce, from the regularity of the course of exchange at all times. This operation resembles very much another of which we have already spoken in treating of banks of circulation upon mortgage. There we recommended the payment of foreign balances as a proper branch of bank administration: here we recommend it to a statesman to interpose voluntarily between his subjects and their foreign creditors. This is the best method of supporting commerce, when it happens accidentally to fall under the discouragement of an unfavourable balance.
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IV. Of Public Credit.
CHAP. I. The credit of a state resembles, in most things, that of an individual: they differ however in this, that when a private man contracts a debt, he himself is answerable for it. When a state contracts a debt, those who contract the obligation in the name of the state are not responsible for it. Hence it happens, that private people are commonly more anxious about paying their debts than statesmen are who administer for the public. Another difference is, that public debts do not so much affect the prosperity of a state as private debts do that of the debtor. The interest of a private debtor is simple and uncompounded; that of a state is so complex, that the debts they owe, when due to citizens, are, on the whole, rather advantageous than burdensome: they produce a new branch of circulation among individuals, but take nothing from the general patrimony.
In deducing the principles of public credit, we must suppose it the established maxim in the state to adhere to the faith of their engagements; and that a permanent fund is appropriated for the payment of the interest of all the money borrowed: a liberty must be supposed, at the same time, to redeem the obligation by adequate payment; and also an easy transfer of the capital from hand to hand, to indemnify every creditor for the loss of his capital, which is not demandable from the state, as the case commonly is in private securities.
The consequence of the swelling of public debts, is, to occasion a proportional augmentation of contributions out of private property. The consequence of this again, is, to produce a vibration in the balance of domestic wealth. This creates a monied interest, which swells in proportion as public debts increase; and which may swell to so great a height as to transfer the income of a whole nation from the nominal proprietors to the public creditors.
A statesman, therefore, ought carefully to attend to the spirit of the nation he governs, before he gives way to a regular and systematical augmentation of public debts. In monarchies, the proprietors of lands may bear for a while the temporary diminutions of their annual income, though they will not easily be made to subscribe to a plan which evidently tends to deprive them of all they have, and to transfer their power and property to a set of men whom they have always considered as their inferiors.
In monarchies, therefore, a great increase of public debts will more probably bring on a national bankruptcy, than in governments which participate of the republican form.
The consequences, therefore, of the swelling of public debts may be, either, 1_mo_, To disturb the tranquillity of the state, by an attempt to transfer the property of it from the real possessors to a new created monied interest: or,
2_do_, If a systematical plan of borrowing upon solid security be not laid down, it may mechanically draw on a general bankruptcy: or,
3_tio_, If debts be allowed to swell beyond due bounds, so as to hurt the interest of the great body of the proprietors, the state may be engaged to adopt the fatal expedient of a spunge: or,
4_to_, If the spirit of the people prove compatible with the system of borrowing and supporting public credit to the utmost extent, then the whole income of the nation will remain in perpetual fluctuation, passing from one set of creditors to another, the statesman still retaining the administration of it for their use: or,
5_to_, If the debts contracted become the property of foreigners, these will either remove into the country where their funds are, or the income of the whole will be converted into a foreign tribute.
CHAP. II. While public expence was defrayed from treasures, public credit was a thing unknown. While supplied from rapine and extortion, it never could exist. During the simplicity of ancient manners, when there was neither industry or circulation, credit was unnecessary: the coin was more than sufficient to serve every purpose of alienation.
When trade and industry began to make a progress in Europe, in the Hans towns, and in the republics of Genoa and Venice, the consequences of their credit were soon felt by Princes, who aukwardly began to imitate their example; first, by borrowing money upon mortgages of their lands and principalities; and afterwards, by imposing taxes and selling them for what they could get to a most rapacious set of men, the tax-gatherers. This spread oppression, and this again soon brought the Prince to poverty.
Taxes, however, once established in this violent method, and upon urgent occasions, came, in time, to be improved, and formed a large fund, which now serves as a solid basis for public credit.
CHAP. III. While taxes were only appropriated for a time, for the repayment of the debts contracted by a state, the attention both of the state and of the lenders was totally fixed upon the discharge of the capitals: but in proportion as money increased, in consequence of the whole system of modern political oeconomy, the lenders formed to themselves a new point of view, viz. the acquisition of a permanent interest arising from a transferable capital.
In order to make this change of policy from borrowing with an intention to repay the capital, to borrowing with an intention to pay a perpetual interest, the more sensible, I have traced in this chapter the progress of the first, by a review of the plan of public credit in England until the end of the last century.
Here I analize briefly the sentiments of Dr. Davenant, and compare them with those established in our days, when the latter policy has taken place; and upon the whole I determine, that the difference in the system of public credit then and at present, has proceeded principally from the difference in the state of circulation, and from the expedients now fallen upon for increasing the quantity of money, in proportion to the uses found for it.
CHAP. IV. I then compare the state of public credit in France, during the administration of Cardinal de Richlieu, with that of England after the revolution. Here I endeavour to point out the influence which the different forms of government have upon the stability of public credit, both in contracting and in paying off public debts.
In France, the power of the Prince furnishes many expedients for paying off capitals, which had been borrowed at an exorbitant interest in times of public distress.
In England, the limited power of the crown, and the responsibility of ministers for their exercise of it, is a great security to those who lend money to the state; and consequently, proves a very great advantage in contracting debts upon reasonable terms.
The longer the two states subsist, the greater will the advantage be found in favour of that which adheres the most strictly to the faith of its public engagements.
When the credit of France and England are compared together, the difference between them is most remarkable. The strict adherence to the faith of public engagements has established, in England, so nice and scrupulous a credit, that the smallest deviation from its principles may prove fatal to the whole system. The credit of France, on the other hand, has been accustomed to a rougher usage; and the frequent acts of power, to the prejudice of creditors, rather occasion a temporary damp than a total destruction of their credit for the future. Such acts of power, however, in critical circumstances, prove extremely hurtful; and the advantage of a well established credit will, in all probability, either open the eyes of that nation to their own interest, or bring calamities upon them, which now appear little to be feared, in their present situation.
CHAP. V. This chapter contains a short sketch of the plan of public credit, as carried on in Great Britain, from the end of the last century, to the conclusion of the peace in 1763. I here enumerate the principal operations, calculated for enlarging the fund of British circulation, by engaging the bank of England to turn into money the discredited bills and tallies of the exchequer. I have pointed out the principle which circumscribes this power in the bank within certain limits. I have traced the progress and fluctuations of the interest of money; which have constantly been in proportion to the demand for borrowing or lending in the market at the time. I have mentioned the rise of the sinking fund, and the use which has been made of it. I have endeavoured to explain the methods of borrowing by premium, and have pointed out the inconvenience attending that plan, as long as the principal view of diminishing a nation’s debt is confined to expedients for lowering the interest of the capital. I have given a progressive state of the augmentation of the debts of Great Britain at the end of every war; to which I have subjoined a short state of the nation at the last peace.
I conclude my chapter, by assigning reasons for the present low state of public credit in Great Britain; which has been principally owing to the large sums of borrowed money invested in the funds before the peace, upon the prospect of a sudden rise in their price, on the return of public tranquillity. This rise would, undoubtedly, have happened, had it not been obstructed by the necessity which the nominal stockholders were put to, of bringing their funds to market, in order to answer the demands of those from whom they had borrowed what they had invested in stock: and until this operation be compleated, that is, until the funds of Great Britain become vested in the real proprietors of them, the state of public credit will constantly be undetermined.
CHAP. VI. Having given a short sketch of the present state of public credit in England, I endeavour, in this chapter, to extract, from the best private authorities to which I could have access, a parallel view of the affairs of France, so far as relates to its revenues, taxes, and debts, at the peace 1763.
By the revenue of France, I here understand, not only what comes clear and nett into the King’s coffers, but also what is farther levied upon his people. The parallel therefore will not hold between the revenue of France and that of England, as represented in the preceeding chapter, without attending to this difference.
The nett revenue of England charged with all its debts and expence of government, we have said to amount to 10 213 000_l._ The gross revenue of France, on the other hand, appears to amount to 24 740 834_l._ sterling.
But if from this be deducted that part which never enters the royal treasure, and which is expended in levying the revenue, and in appropriations for particular perpetual expences, to the amount of 6 815 111_l._ sterling, there will remain of net income, paid into the King’s coffers, and charged with all the debts and expence of government, only 17 925 723_l._ sterling.
If from this sum we deduct the total amount of the net revenue of Great Britain, (10 213 000_l._ sterling) the remaining sum of 7 712 723_l._ sterling, will shew the excess of the French revenue above that of England.
The foregoing sum of 17 925 723_l._ sterling, arises from the following branches:
1_mo_, Those which compose the King’s ordinary revenue; which, at the peace 1763, amounted to 12 546 666_l._ sterling, burdened with the payment of 2 022 222_l._ sterling of interest of the debts charged upon it.
2_do_, The extraordinary taxes established for a limited time, after the peace of Aix-la-Chapelle. These amount to 2 326 133_l._ and are totally appropriated for the payment of capitals, and interest upon them, incurred during the late wars, according to the principles of public credit in practice in England, during the reign of K. William and Q. Anne: and so soon as this fund has cleared the charges upon it, it is to cease, being no permanent branch of revenue.
3_tio_, The extraordinary revenue raised on account of the last war. This amounts to 3 052 923_l._ sterling, and consists of the second and third twentieth penny, granted for a very limited time, and appropriated, as the former branch, for discharging the debts lately contracted. The sum of these three branches made the total of the 17 925 723_l._ paid in to the King’s treasury, and burdened with all the public debts.
If we therefore suppose the two last branches of French revenue to be continued until all the debts charged upon them are paid, then we shall find the state of that kingdom reduced to the King’s ordinary revenue of 12 546 666_l._; from which however must be deduced at least one half of the capitation. This half amounts to 1 182 222_l._ sterling, and is so burdensome, that its continuance will be impossible. The revenue therefore will be reduced to 11 364 444_l._ sterling, charged with 2 022 454_l._ sterling, interest of debts; of which indeed 711 111_l._ are annuities upon lives, and must therefore be extinguished in time.
According to this view, the revenue of France will be 11 364 444_l._ sterling, charged with the annual payment of 2 022 222_l._ interest of debts: and the revenue of Great Britain is 10 213 000_l._ charged with the annual sum of 4 860 000_l._ interest of debts.
What remains free for France is 9 342 222_l._ sterling; and for England, 5 353 000_l._
But out of this free revenue of France must be deducted the permanent articles of expence charged upon the ordinary revenue, exclusive of the interest of debts already deducted. These articles amount to the sum of 8 468 889_l._ which being deducted from 9 342 222_l._ leaves a free balance of no more than 873 333_l._
On the other hand, if we suppose the net amount of the revenue of Great Britain, after paying the interest of its debts, to be, as above, 5 353 000_l._; and if the expence of the current service of the year, including the civil list, be supposed to amount to 4 800 000_l._ sterling, as it nearly did, before the commencement of last war, there will remain of free balance 533 000_l._[54]
Footnote 54:
But if the current annual expence should not exceed 3 600 000_l._ or 4 400 000_l._ including the civil list, which is nearly the present estimate, we may then add 400 000_l._ to the free balance, and state it at 950 000_l._ in round numbers.
From all which we may conclude, that, abstracting from extraordinary supplies for extraordinary exigencies, the revenue of both nations is pretty nearly in proportion to their current expence; and, therefore, their respective powers, when engaged in war, will be in proportion to their credit at the time.
CHAP. VII. In comparing the credit of the two nations, two things enter into consideration. First, the confidence of the world, in the solidity of their respective public faith. This I take to be totally in favour of the British nation. The second is, the solidity and extent of the funds, which are to be provided in security of the sums to be borrowed upon future emergencies. These resources, in France, we have seen to consist in their dixiemes, vingtiemes, double capitation, and extraordinary impositions upon the clergy, and other bodies politic; taxes so burdensome in their nature, and so contrary to the spirit of the French nation, that it is hardly possible they ever can be made so permanent as to answer any other purpose than a short temporary appropriation.
The true resources of France are confined to those taxes upon consumption above enumerated, which do not enter into the ordinary revenue, and which are now imposed and appropriated only for a time. When these taxes become free, they may no doubt be rendered perpetual, and appropriated for a future fund of credit.
On the side of Great Britain, the case is different. The greatest part of her revenue is already perpetual; and the only two branches of annual grants, the land-tax and malt-duty, are not so excessively burdensome, nor so repugnant to the genius of the people, as to render the raising of them at all precarious. And were this nation once to adopt the system of raising money, in time of peace, sufficient to defray the charges of government, the sinking fund would prove a resource for the future, far above any thing that France can boast of.
CHAP. VIII. Having by this short sketch of the state of credit in Great Britain and France, prepared a sort of canvass for our farther reasoning, I proceed to apply principles to some combinations, which might be formed concerning the consequences of an over-stretched credit.
In proportion as credit is used for borrowing money to be sent abroad, either a supply of currency must be provided for filling up the void, or alienation, trade, industry, &c. must suffer a check.
And even if money should be borrowed to be spent at home, an additional quantity of it must be added to circulation; because this new expence of the state will require it.
Every fund of property may be converted into money, with the assistance of credit, providing the statesman lends his hand to the operation: and the fundamental principle for supporting credit of all kinds, is, to provide every one with money who has property to pledge for it.
When money is borrowed by a state, to be spent abroad, the loan must either be made in coin, or in paper. If in the first, it is exported; because coin is the money of the world: if in paper, it must either be converted into coin, and exported, or it must be remitted by bills, drawn upon countries, debtors to England, for example; or, in the last place, it must be paid in the way of credit, by constituting England debtor to the Continent for it. When it is paid by bills drawn upon countries, debtors to England, then the consequence of such a loan is to convert the balance of trade into a capital in the public funds.
In whatever way money is borrowed by a state, whether from natives, or foreigners, the consequences are the same. The operation of a favourable balance of trade will transfer what is owing to foreigners in favour of natives; and a wrong balance of trade will transfer the property of natives to foreigners.
If no check be put to the augmentation of public debts, if they be allowed constantly to accumulate, and if the spirit of a nation can patiently submit to the natural consequences of such a plan, it must end in this, that all property, that is income, will be swallowed up by taxes; and these will be transferred to the creditors, the state retaining the administration of the revenue.
The state, in that case, will always consider those who enjoy the national income as the body of proprietors. This income will continue the same, and the real proprietors will pay the taxes imposed; which may be mortgaged again to a new set of men, who will retain the denomination of creditors; until by swallowing up the former, they slip into their places, and become the body of proprietors in their turn, and thus perpetuate the circle.
CHAP. IX. But as a thousand accidents may put an end to public credit, before such intricate revolutions can be accomplished, the consequence must be a bankruptcy. This may either happen by a deliberate act of government, or from the natural consequences proceeding from an over-stretched credit.
I here endeavour to shew, that it is impossible to form a supposition of circumstances, in which a deliberate act of bankruptcy can be a prudent measure. The only end that could be proposed to be attained thereby, would be, to relieve those who are oppressed by taxes. But a sudden abolition of taxes would have the effect of ruining the landed interest, as well as all the manufacturing classes. Sudden revolutions are constantly pernicious; and no revolution can be so sudden as that of a bankruptcy. If such a revolution should happen, from circumstances which can neither be foreseen or prevented, the best expedient would still be, to adhere, as much as possible, to the faith of public engagements; because no expedient would be so productive of good consequences, in such a calamitous situation.
While the debts of a nation are due to its subjects, and while there remains any balance due in favour of the nation, no increase of debts can necessarily bring on a bankruptcy. It is a contradiction to suppose that a nation can become bankrupt to itself. But when, on the general state of payments between a nation and the world, there is found an annual balance due, which cannot be compensated either in the way of payment, or in the way of credit, then indeed a bankruptcy becomes unavoidable.
From this reasoning we may conclude, that the method of determining the exact extent of public credit, is to keep a watchful eye upon the increase of debts due to foreigners, and to compare these with the favourable balance upon the trade of the nation. When those debts and this balance begin to draw near to an equality, if part of the capital of the public debts be not immediately paid off, by an augmentation upon public contributions, the infallible consequence will be a state-bankruptcy.
CHAP. X. The first requisite for contracting public debts, is to establish a fund for fulfilling public engagements. This procures the confidence of the lender. The next is, to establish an extensive plan of credit at home, which may be sufficient at all times to keep circulation full.
When, from the effects of borrowing, too great sums are, from time to time, drawn out of circulation, the void must speedily be filled up. If this be neglected, taxes will not be paid, as has been often observed: besides, if money be allowed to become too scarce, in proportion to the demand for it, interest will rise, and borrowing will become proportionally more burdensome to the state in general.
Foreign expence frequently drains the fund of circulation at home: hence a multitude of inconveniences arise. To prevent these, I suggest a new scheme of borrowing, by opening subscriptions in foreign countries where the interest is annually to be paid. This being to be remitted by the country borrowing, a statesman may, with the greater ease, obviate the inconveniences which might arise to circulation from such remittances.
In this chapter, I endeavour to prove by new arguments and illustrations, that national distress is more owing to a scanty circulation, than to circumscribed property; and a statesman who neglects to employ every method for keeping up the circulating equivalent within the state he governs, to the full proportion of all the uses found for it, fails in the most essential requisite for promoting the prosperity of his people, and the establishment of his own credit.
Having pointed out the methods of contracting debts, I proceed to the method of paying them. This may be accomplished in six different ways, by the help of a sinking fund; which,
1_mo_, May be applied annually, to the discharge of certain capitals, at the option of the state. Or,
2_do_, According to a certain rule, to determine the preference.
3_tio_, By appropriating the fund, for the payment of a proportional part of the whole outstanding capital. Or,
4_to_, By reducing the interest of the capitals. Or,
5_to_, By converting the whole of the capitals into determinate annuities, proportionate to the extent of the sinking fund. Or,
6_to_, By the means of lotteries, where the state may gain what gamesters are willing to lose.
I point out the advantages and inconveniences of every plan. The first five expedients are too plain to require a recapitulation. The sixth amounts briefly to a supposition, that the interest of the public debts is brought, by a proper chain of administration, to a lower rate than in any other part of Europe. In this situation, accidental circumstances will occasion (as at present) fluctuations in the price of the stocks. When they fall below par, let government open subscriptions for lotteries, to be paid in stock at the market price. Subscriptions also might be opened, and the old capitals might be received at the market price, and constituted a-new at the current interest, with a small premium above the rate at the time. By such means, the sum of the old capitals would be reduced, and a small benefit would accrue to the subscribers. Then, upon the rise of the stocks, the interest on these subscriptions might be reduced again; from which a double benefit would result; the price of stocks would be supported on one hand, and the capitals of the public debts would be reduced on the other.
CHAP. XIV. Recapitulation of the Fifth Book.
Of Taxes.
INTROD. Having already explained the effect of taxes upon domestic circulation; it now remains to investigate the principles by which they are to be imposed on their proper objects.
CHAP. I. I divide taxes into proportional, which affect consumption, or, more properly, what may be called expence; cumulative, which affect property; and personal, which consist in personal service. These I explain by giving examples of each.
CHAP. II. Proportional taxes may be so imposed as to affect almost every expence of living; and as all expence should arise from income, not from stock, the first principle of taxation, is, to confine all impositions to income only: whatever affects a capital is oppressive and unjust. But as in all expence there is alienation, although in all alienation expence is not implied, the best method to avoid the mistake of taxing stock instead of income, is, to impose the tax in such a manner as to affect the consumers only; in which case, whoever buys to sell again will draw the tax completely back.
CHAP. III. In this chapter, I fully explain the operation of drawing back proportional taxes.
When the commodities charged with such taxes are either not consumed by purchasers, or by the industrious classes, they are constantly drawn back, except so far as the consumption made by the latter is an article of superfluity.
Hence I conclude, that the price of labour is raised by proportional taxes, in proportion to industry only, though the price of the commodity taxed be raised in proportion to the tax. Consequently, the more taxes are found to increase the price of labour, the more we may conclude in favour of the industry of the manufacturing classes: and the more they bring into the exchequer, the more we may conclude in favour of the ease and opulence of those who consume the objects of such taxes.
CHAP. IV. The proper object of cumulative taxes, is the large possessions of the higher classes of a people, which can bear a diminution in favour of the state, without danger of encroaching upon their necessary or easy subsistence. It is not so when they are laid upon the lower classes; because these are either composed of the industrious, or of beggars. The first should be enabled to draw back from the rich, what they advance for the public service. The latter have nothing to give; to tax them is but adding to their misery, without relieving the wants of the state.
The great advantages of proportional taxes over the cumulative, may be reduced to three.
1_mo_, The proportion between the tax and the object taxed is determinate.
2_do_, The proportion may be known to every body.
3_tio_, The time of paying the tax is regular and gradual; because in paying for the commodity you pay for the tax, and your liberty in buying such commodities is unrestrained; consequently, the expence is supposed to be in proportion to what your income can afford. Whereas in the cumulative taxes, it is, first, hardly possible to preserve the proportion between the tax and the ease of a person’s circumstances. In the second place, it is impossible for the state to ascertain exactly that proportion. And in the last place, the demand for the tax is made at a time when people are often unprepared.
CHAP. V. The principal inconveniences alleged against proportional taxes, are, 1. That they raise prices: 2. Discourage consumption: and 3. That they are oppressive and expensive in the collection. These inconveniences are more apparent than real, as will appear from what follows.
1_mo_, A proportional tax, rightly imposed, and properly levied, will undoubtedly raise the price of the objects taxed; but it will only consequentially raise the price of the labour of the industrious man who pays it; because he will draw it back in proportion only to his diligence and frugality.
The price of labour is regulated by demand, and is influenced only by proportional taxes.
2_do_, As to discouraging consumption, if taxes raise prices, this circumstance proves the increase of consumption; because if consumption were to diminish, taxes would not be paid, and prices would fall of course, even to the detriment of the industrious. These are always the consequences of proportional taxes, when wrong imposed.
3_tio_, As to the expence and oppression in levying them, these inconveniences are, in a great measure, in proportion to the disposition of the people to defraud the public: for when they are fairly paid, and honestly collected, proportional taxes are little more expensive, and infinitely less oppressive than any other. I conclude my chapter by some observations drawn from the practice of different countries, which point out a method of avoiding both the oppression and the expence of levying proportional taxes.
CHAP. VI. All taxes are paid out of the circulating money of a country; consequently, they cannot exceed a certain proportion of that sum. It is not, therefore, from the value of the property, or the quantity of consumption, that any one can form a guess of the probable amount of taxes, so much as from the easy and expeditious circulation, which facilitates alienation and sale.
Were taxes, indeed, paid in kind, they might bear a proportion to fruits and labour; but then they would diminish the fund of subsistence: whereas they now draw a share of that quantity of money which circulates through the hands of every individual.
The great difference between cumulative and proportional taxes, consists in this. That in the first, he who pays them cannot draw them back in proportion to his industry; in the last, he may: but so far as any one of an industrious class proves idle or extravagant, every proportional tax will affect his daily profits, as every cumulative tax will affect the income of a fund already acquired. This deduction of principles is of great use in imposing taxes; because it points out the method of giving to many cumulative taxes usually imposed on the lower classes, all the advantages of those of the proportional kind.
CHAP. VII. Taxes ought to be imposed for the benefit of the public, not of private people: and while that object is fulfilled, taxes are beneficial in every respect. When they are properly levied, they only abridge unnecessary private expence: when they are properly applied by the state, they advance improvement every where; and those who have fortunes already acquired, will be brought to contribute to the ease of the lower classes.
Thus by the help of cumulative and proportional taxes, rightly imposed, and rightly expended, circulation is greatly increased; industry is advanced; the public good is augmented, not diminished; and the burden of payments becomes so equally proportioned, as not to be felt in any degree sufficient to overbalance the advantages resulting from the general system.
CHAP. VIII. Having said that cumulative taxes affect the income of funds already acquired, I observe, that this income proceeds from moveable or immoveable property. The first of which will constantly avoid the grasp of every statesman who attempts to lay a tax upon it. Cumulative taxes, therefore, if carried to their utmost extent, may absorb the whole income of immoveable property; but of that only.
Proportional taxes, again, have been said to affect the superfluity of those who consume the objects of them; consequently, if every thing which is consumed were first to suffer an alienation for money, a proportional tax might be imposed upon it.
The method, therefore, of carrying proportional taxes to their utmost extent, is, to draw to market every thing consumable; and insensibly to raise the tax upon it, so high as to absorb, as much as possible, the whole superfluity of the consumers.
Taxes being carried to that height, the state will become proprietors of the whole income of the immoveable funds, and the industrious classes alone will augment their wealth, in proportion to their frugality.
From this general principle it appears, that for the establishment of proportional taxes, consumption is requisite, together with alienation; consequently, where alienation takes place without consumption, as in the sale of lands, and other immoveable subjects, a proportional tax cannot be, properly, imposed. And also where consumption takes place without alienation, as when the fruits of the earth are consumed by those who raise them, proportional taxes cannot, with any propriety, be levied. Farther,
As taxes do not bear a proportion to effects, but to circulation, it follows, that they can only be raised, properly, upon alienation by sale. Many examples however may be found of proportional taxes, imposed in different countries, where neither sale or even alienation takes place. These I observe to be the worst kind of proportional taxes, and the most oppressive to those who pay them.
From the principle that taxes are in proportion to circulation, and not in proportion to consumption, we discover the reason why of old they were so difficult to be raised. Consumption then went on as now, in many respects, in proportion to the number of inhabitants; but circulation, that is, alienation by sale, bore no proportion to it.
The effect of every increase in circulation is to swell the amount of taxes; and when they are extensively imposed in a country of industry, the whole currency is thereby made to flow through the coffers of the public, as the blood of the human body flows through the heart, and is by that diffused through every member.
CHAP. IX. I next examine the consequences of a total abolition of taxes, the better to discover the effects which such an alteration would produce, first, upon the prosperity of the whole community; and next, upon that of the principal classes of inhabitants, which compose it. These I reduce to three.
1_mo_, Those who administer government, and who are maintained from the amount of taxes.
An abolition of them, with respect to this numerous class, would draw consequences along with it, directly destructive to their interest; and, consequently, prejudicial to that of all the industrious classes who supply their consumption.
2_do_, With respect to the second class, which I suppose to be composed of the industrious part of the people, I observe, that an abolition of taxes must proportionally imply a diminution of circulation; this would produce a proportional diminution upon alienation; consequently, would interrupt the industry of many, and thereby throw them into a hurtful competition among themselves for subsistence. And as it has been proved, that the industrious classes pay no taxes, as matters stand, providing they be diligent and frugal, they consequently would gain nothing, and must lose a great deal by the abolition of them.
3_tio_, In the third class I comprehend those whom we have hitherto considered as the opulent and idle consumers. Of this category the proprietors of land form a considerable branch. They, we have said, draw back no part, either of the cumulative or proportional taxes, which affect them; but although they be deprived of that immediate indemnification, competent to the industrious, they reap, in another way, advantages which more than compensate all the burden laid upon them. These proceed from the consequences of that spirit of industry which is diffused over the whole people; in consequence of which, their lands are improved, the produce of them is readily disposed of, and what proves superfluous for domestic consumption meets with a ready market abroad, and thereby supports the value of all productions within the country.
It may be asked, then, where the burden of taxes falls, since every class of inhabitants seems to gain some advantage by them?
I answer, that they imply no burden when rightly imposed. The augmentation of industry, in consequence of the increase of circulation, provides a fund of well employed time, which, converted into money, is more than sufficient to pay all the taxes not immediately affecting the income of solid property; and the constant improvement of this, in consequence of the former, is more than sufficient to indemnify the land-proprietors.
Taxes, in this light, resemble the expence laid out upon new establishments for improvement; because in their consequences they augment the prosperity and ease of the whole people, not by being levied, but by being properly applied, as is farther explained in the next chapter.
CHAP. X. Here I examine whether taxes be a spur to industry, as some pretend.
The doubt concerning this point has arisen from what daily experience has shewn, that nations become industrious in proportion to the taxes they pay. It is not very evident, that the payment of a tax by any person should enable him to discharge it with more facility, unless it be from the profit he reaps in drawing it back from others, with an additional profit to himself. But it is palpable that the amount of taxes being properly expended by a state, will increase circulation, and give fresh encouragements to industry of every kind.
I close this chapter with a short representation of the nature of ancient and modern circulation, accompanied with observations upon their respective effects in rendring mankind industrious.
CHAP. XI. Of all cumulative taxes, that laid upon land-property produces the greatest amount, with the least oppression to the contributors. This leads me into a particular inquiry into the nature of the land-tax, as it is established in Great Britain, and in France.
To render a land-tax equal and easily born, the imposition ought to be preceeded by a fair valuation of every article of revenue intended to be taxed, and no other income but that proceeding from an immoveable fund of property, ought to be affected by it. From this I am led to disapprove of the method of assessment established in England by the land-tax; and also of blending a tax upon solid property, with an equal imposition upon personal estates, which we have shewn to be of a nature incompatible with cumulative taxation.
The defects of this kind of imposition in France (where it is called the taille) are different. There the rents of lands, which are the proper object of every land-tax, are frequently withdrawn from under the influence of it, in consequence of the privileges enjoyed by the higher classes, which are exempted from the taille. The consequence is, that the French land-tax falls upon that part of the lower classes who are employed in the cultivation of the soil. From this proceeds a double inconvenience.
If those who cultivate are proprietors, their portions are, commonly, very small, and a land-tax which would be light to a considerable proprietor, is quite intolerable to those who draw little more from their portion than what is necessary for their own subsistence. If those who cultivate are lessees to the more considerable proprietors, the burden falls upon them independently of the land-rent, which ought naturally to bear it.
As a proof that this is a true representation of the matter, I review the Marechal de Vauban’s scheme for new modelling the system of French taxation: and from the intolerable oppression which would follow the execution of it, we may judge of the present state of taxes in a nation where that scheme was intended as a considerable alleviation of their burden.
Nothing but the establishment of industry and extensive credit, with a substitution of proportional taxes, instead of the many cumulative ones, imposed on the lower classes in France, can ever produce a facility in paying the considerable impositions laid upon that nation.
CHAP. XII. The most proper method of imposing a land-tax is, without doubt, to confine the imposition to the rent of lands only, and to lay it on in proportion to them. But how is it to be expected that ever such a plan can take place in a nation where the proprietors of land govern the state? In France, the power of the King has never been able to establish a tax upon the rent of lands, for any longer duration than that of a foreign war. In a neighbouring nation, it has now been established for the greatest part of a century. Were it there to become perpetual, it might be converted into a new domain, or it might prove a fund for discharging, at once, a very great part of the national debt.
When taxes are imposed, it is of great consequence to establish a right administration of them. The easiest method for a state, is to give them in farm; and this was the general practice every where, on the first establishment of taxes. But here no general rule can be laid down.
Cumulative taxes are better administred by commissioners, than let out in farm. The operation of levying them is simple; but when they are farmed, the lower classes of the people are apt to be oppressed. When farms are properly established, an open management of them is absolutely requisite: from this new improvements naturally arise, which give to the farm almost every advantage of the management by commissioners. This improvement is, to divide the profits upon the farm between the state and the farmers: a plan put in execution in France not many years ago.
No question whatever appears more difficult to resolve, than that of ascertaining the fund out of which taxes ought to be paid. Through the whole course of this inquiry, I have endeavoured to shew, that the real fund of taxes is the money circulating among the inhabitants, either in consequence of sale, or of payments. In order to expose this question in a new light, I have commented upon two passages of Davenant, where he estimates this fund from the quantity of national consumption.
From this he is led to compute the yearly taxable expence of every man in England at 8_l._ sterling; when perhaps the circulation of money through the hands of many may not be twenty shillings: whereas, according to my theory, it is these twenty shillings only that can be laid under any taxation whatever.
I thought this method of comparing the result of Davenant’s reasoning with mine, might better serve to support the latter than any other I could contrive.
The last question proposed in this chapter is no more than a hint to shew, that a proportional tax, laid upon meat and drink, is the most proper equivalent for a land-tax; because those who purchase their subsistence with money are, according to the principles of the first book, those who consume that part of the fruits of the earth which is equivalent to the land rent. If this be arbitrarily laid under an imposition, by a pound rate, or otherwise, the proper drawback, if any be allowed, should be from a tax laid upon those who consume that part of the earth’s produce which belongs to the landlords.
I have now concluded this inquiry, according to the plan I at first proposed. It is the fruit of eighteen years close, though agreeable application; interrupted only by many intervals of bad health, and many strokes of adverse fortune.
It never was, till lately, my intention to offer to the public, during my life, what I had composed purely for my own instruction and amusement. But upon comparing my sentiments in several points with those of the generality of my friends, they have been found so widely different, that I was thought in duty bound to my country, to submit them to the criticism of the public.
To this I have the more willingly submitted, as I thereby shall pursue my first intention in taking my pen; which was, to clear up my ideas on this subject. And since I can now draw no farther knowledge from my own inquiries, I must expect it from the criticisms of those who may think it worth their while to animadvert upon my notions.
FINIS.
A TABLE OF COINS,
Shewing the Quantity of Fine Metal contained in them.
The number of grains of fine metal in every coin is sought for in the regulations of the mint of the country where it is coined, and is expressed in the grains in use in that mint: from that weight it is converted into those of other countries, according to the following proportions:
3840 Troy-grains, 4676.35 Paris-grains, 5192.8 Holland-aces or grains, and 4649.06 Colonia-grains, are supposed to be equal weights; and the coins in the table are converted according to those proportions.
Table of Coins, reduced to Grains of fine Metal, according to the Troy, Paris, Colonia, and Holland-weights.
───────────────────────┬─────────────────────────────────┬───────────────────────────────── │ Gold Coins │ Silver Coins. ───────────────────────┼───────┬───────┬────────┬────────┼───────┬───────┬────────┬──────── │Troy. │Paris. │Colonia.│Holland.│Troy. │Paris. │Colonia.│Holland. ───────────────────────┴───────┴───────┴────────┴────────┴───────┴───────┴────────┴──────── English Coins. ───────────────────────┬───────┬───────┬────────┬────────┬───────┬───────┬────────┬──────── 1 A Guinea by statute │118.651│ 144.46│ 143.65 │160.45 │ │ │ │ 2 A Crown by statute │ │ │ │ │ 429.68│ 523.2 │ 520.2 │ 581. 3 A Shilling by │ │ │ │ │ 85.935│ 104.65│ 104. │ 116.2 statute │ │ │ │ │ │ │ │ 4 A Silver Pound │ │ │ │ │1718.7 │2093. │2080.8 │2324.1 sterling by │ │ │ │ │ │ │ │ statute 1601 │ │ │ │ │ │ │ │ 5 A Gold Pound │ 113. │ 137.61│ 136.8 │152.8 │ │ │ │ sterling by │ │ │ │ │ │ │ │ statute 1728 │ │ │ │ │ │ │ │ 6 A Silver Pound │ │ │ │ │1639.38│1996.4 │1984.7 │2216. sterling in │ │ │ │ │ │ │ │ currency = 20⁄65 │ │ │ │ │ │ │ │ lib. troy │ │ │ │ │ │ │ │ 7 A Silver Pound │ 113. │ 137.61│ 136.8 │152.8 │1638.5 │1995.3 │1983.7 │2215.7 sterl. at the │ │ │ │ │ │ │ │ proportion of gold│ │ │ │ │ │ │ │ to silver as 1 to │ │ │ │ │ │ │ │ 14½ │ │ │ │ │ │ │ │ 8 A Gold Pound │ 118.4 │ 144.18│ 143.34 │160.11 │1718.7 │2093. │2080.8 │2324.1 sterling at the │ │ │ │ │ │ │ │ same proportion of│ │ │ │ │ │ │ │ 1 to 14½ │ │ │ │ │ │ │ │ 9 A Pound sterling at │ 115.769│ 140.98│140.16 │156.55 │1678.6 │2041.2 │2032.2 │2269.9 the mean │ │ │ │ │ │ │ │ proportion in gold│ │ │ │ │ │ │ │ and in silver │ │ │ │ │ │ │ │ 10 A Shilling current =│ │ │ │ │ 81.961│ 97.8 │ 99. │ 110.82 1⁄65 of a pound │ │ │ │ │ │ │ │ troy │ │ │ │ │ │ │ │ 11 A Guinea in silver, │ │ │ │ │1804.6 │2197.6 │2184.8 │2440.3 or 21 shillings │ │ │ │ │ │ │ │ standard weight │ │ │ │ │ │ │ │ 12 A Guinea at the │ │ │ │ │1720.4 │2095.1 │2082.8 │2326.4 proportion of 1 to│ │ │ │ │ │ │ │ 14½, worth in │ │ │ │ │ │ │ │ silver │ │ │ │ │ │ │ │ 13 A Pound troy, or 12 │5760. │7019.2 │6973.5 │7789.2 │ │ │ │ ounces English │ │ │ │ │ │ │ │ weight │ │ │ │ │ │ │ │ ───────────────────────┴───────┴───────┴────────┴────────┴───────┴───────┴────────┴──────── French Coins. ───────────────────────┬───────┬───────┬────────┬────────┬───────┬───────┬────────┬──────── 1 A Louis d’or │ 113.27│ 137.94│ 137.13 │ 153.17 │ │ │ │ 2 A Crown of six │ │ │ │ │ 409.94│ 499.22│ 496.3 │ 554.3 livres │ │ │ │ │ │ │ │ 3 A Crown of three │ │ │ │ │ 204.97│ 249.61│ 248.15 │ 277.1 ditto │ │ │ │ │ │ │ │ 4 A Livre │ │ │ │ │ 68.34│ 83.23│ 82.74 │ 92.42 5 A Louis d’or, or 24 │ │ │ │ │1639.7 │1996.9 │1985.2 │2217.4 livres in silver │ │ │ │ │ │ │ │ 6 A Marc of Paris │3783.87│4608. │4581.1 │5116.9 │3783.87│4608. │4581.1 │5116.9 weight, fine gold │ │ │ │ │ │ │ │ or silver │ │ │ │ │ │ │ │ 7 A Marc of gold coin │3398.3 │4138.5 │4114.3 │4593.4 │ │ │ │ effective weight, │ │ │ │ │ │ │ │ in fine │ │ │ │ │ │ │ │ 8 A Marc of silver │ │ │ │ │3402.3 │4143.4 │4119.2 │4600.9 coin effective │ │ │ │ │ │ │ │ weight, in fine │ │ │ │ │ │ │ │ ───────────────────────┴───────┴───────┴────────┴────────┴───────┴───────┴────────┴──────── German Coins. ───────────────────────┬───────┬───────┬────────┬────────┬───────┬───────┬────────┬──────── 1 A Carolin legal │ 115.45│ 140.6 │ 139.78 │ 156.12 │ │ │ │ weight │ │ │ │ │ │ │ │ 2 A Ducat of the │ 52.8 │ 64.37│ 64. │ 71.48 │ │ │ │ Empire ditto │ │ │ │ │ │ │ │ 3 A Florin of │ │ │ │ │ 179.73│ 218.87│ 217.6 │ 243. Convention │ │ │ │ │ │ │ │ 4 A Dollar of │ │ │ │ │ 269.59│ 328.31│ 326.4 │ 364.5 Convention │ │ │ │ │ │ │ │ 5 A Dollar of │ 17.85│ 21.74│ 21.615 │24.14 │ │ │ │ Exchange, the │ │ │ │ │ │ │ │ Carolin = 9 flor. │ │ │ │ │ │ │ │ 42 kreutzers │ │ │ │ │ │ │ │ 6 A Florin current = │ 10.54│ 12.84│ 12.77 │14.26 │ │ │ │ 1⁄11 of a Carolin │ │ │ │ │ │ │ │ 7 A Carolin in silver │ │ │ │ │1674. │2038.6 │2026.8 │2263.8 at the proportion │ │ │ │ │ │ │ │ of 1 to 14½ │ │ │ │ │ │ │ │ ───────────────────────┴───────┴───────┴────────┴────────┴───────┴───────┴────────┴──────── Dutch Coins. ───────────────────────┬───────┬───────┬────────┬────────┬───────┬───────┬────────┬──────── 1 A Dutch Ducat │ 51.76│ 63. │ 62.67 │ 70. │ │ │ │ 2 A Florin in silver │ │ │ │ │ 148. │ 180.3 │ 179.2 │ 200.21 ───────────────────────┴───────┴───────┴────────┴────────┴───────┴───────┴────────┴────────
[The Binder is desired to place this TABLE before the Index in Vol. II. and not to cut off the Margin, but to fold it.]
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INDEX.
N. B. For the analysis of the subject, see the Table of Contents prefixed to each volume.
A.
Agriculture, the most essential requisite for population, Vol. I. p. 21. 25. The extension of, how to be regulated, id. 28. When it may be said to be carried to its utmost extent, id. 82. The difference between, when exercised as a trade, and when as the direct means of subsistence, id. 88. Remarks on the state of, in Spain, id. 89. In Germany, id.. 91. In England and France, id. 102. In Scotland, id. 103. Whether the efficient cause of the multiplication of mankind, or their multiplication of agriculture, id. 114. What species of, most advantageous to modern society, id. 127. The natural distribution of, id. 139.
Agio of the bank of Amsterdam, explained, II. 296.
Aides in the French taxes, explained, II. 502. n.
America, the alterations in the modes of government in Europe, occasioned by the discovery of, I. 10. 51.
Amsterdam, remarks relative to the bank of, II. 56. Original intention of the bank there, id. 292. Principles of circulation through it, id. 298. Its credit compared with the bank of England, id. 308. Dangers to which it is liable, id. ib.
Animal food, detrimental to population, I. 117.
Animals, their numbers in all countries proportioned to the quantity of food produced for them, I. 18. This proposition illustrated in mankind, id. 19. 113.
Anne, Queen, state of the revenue of England at her accession, II. 381.
Antients, their simplicity of manners, how compatible with a great multiplication, I. 152.
Arbitrary power, its influence on trade, I. 244.
Army, regular, the necessity of, in an industrious state, argued, I. 136.
Army, how to raise a supply of men for, without having recourse to the hiring foreign troops, I. 450.
Athenians, Xenophon’s plan for the proper employment of, I. 460.
Athens, surprizing quick reduction of its wealth, I. 438.
B.
Balance between nations, the nature of, in a commercial view, explained, II. 334. Hints for the payment of, without the intervention of coin or bullion, id. 344.
Balance of power, the nature of, inquired into, I. 448.
Balance of trade, what, II. 21. Reflections relating to, I. 416. Whether any judgment can be formed concerning it, barely from the quantity of specie found in a nation, I. 429. Whether the state of specie furnishes any rule to judge of it, id. 435. A wrong one raises the price of bullion to the value of coin, II. 5. Between England and France, the state of, how to be discovered, id. 18. How the payment of a wrong one affects circulation, id. 169.
Bank, whether landed men might not as well issue their own notes on their landed security, as apply there, II. 131.
Banks, the two general classes of, II. 146. Of circulation, what, id. 150. How a good one may be obliged to stop payment, id. 152. On what the solidity of it depends, id. 153. On what kind of credit such banks ought to issue their notes, id. ib. How their obligation to pay in coin arose, and the consequences of that obligation, id. 157. How affected by a wrong balance of trade, id. 161. How a grand balance may be paid by, without the assistance of coin, id. 162. How hurt by leaving the payment of a wrong balance to exchangers, id. 165. Upon what principles they ought to borrow abroad, and give credit at home, id. 178. Of Edinburgh, hints for the advantage of, id. 187. How they may be enabled to discharge notes on demand, id. 200, 213. Subaltern, and their competition with each other, II. 202. National, necessary regulations for, proposed, II. 205. When, and in what case, they shall be obliged to keep open books, id. 208. Whether it is their interest to grant credit and cash accounts to exchangers and others, and to make a trade of sending the coin out of the country, id. 211. How by the return of a favourable balance, the debts of foreigners may be paid off, and the nation delivered from that burden, id. 218. Dangerous to an idle nation, id. 232. Of the first establishment of that of Mr. Law, id. 235. The Royal Missisippi, id. 243.
Bank of Amsterdam, original intention of, II. 292. The principle of its circulation of coin explained, id. 298.
Bank of England, the interest of, examined, I. 629. State of, II. 158. Its situation in the year 1745, id. 176. Its principal operations traced, id. 220. Its circulation with the exchequer explained, II. 225. Hints for the advantage of, proposed, id. 229. How the paper of, tends to supply circulation, id. 233. Its credit compared with that of the bank of Amsterdam, id. 308.
Banks of deposit and transfer, II. 291.
Bank notes, the nature of, explained, II. 151. Of the optional clauses contained in, id. 195.
Bankers and exchangers, subaltern ones, the use of, II. 154.
Banking, that branch of credit best deserving the attention of a statesman, II. 149. The nature of, in Scotland, id. 155.
Bankruptcies, national, how occasioned, II. 456. The natural consequences of, traced, id. 457. As supposed to take place by a concerted act of power, id. 458. The supposition of a nation becoming bankrupt to itself inconsistent, id. 462.
Barter, the first species of trade, I. 175.
Beer, remarks on the late additional duty on, II. 512.
Belloni, Mr. mistakes of, pointed out, with respect to estimating the exportation of commodities of a particular country, by the quantity of money found in it, I. 430.
Bills of mortality, plan for the improvement of, I. 72.
Birmingham, no silver coin counterfeited there, II. 99. note.
Brakenridge, Dr. his account of the state of population in Great Britain, I. 95. Remarks on, id. 97.
Bread, the price of, how limited in the greatest famine, I. 397.
Britain, Great, remarks on the state of population in, I. 95. By what means her credit is supported, II. 107. Short state of its present taxes, debts, and funds, id. 398. Compared with those of France, id. 438.
Bullion, how the price of, is regulated, I. 564. II. 20. Why dearer in England than in France, id. 14. The advantages of this to France, id. ib. Brought to the mint, when trade is favourable, id. 35. The causes of its rise and fall in the English market explained, II. 332.
Buyers and sellers, the interest of, examined, I. 628.
C.
Canada, the principles of the European trade to, inquired into, I. 186.
Cantillon, Mr. his remark on the course of exchange between London and Paris, II. 17.
Capet, Hugh, the nature of his jurisdiction compared with that of a king of Poland, I. 240.
Charity, modern, shewn to be impolitic, I. 467.
Child, remarks on that position of his, that the legislature can keep down the rate of interest to the level most advantageous for trade, II. 122.
Circulation, in a political sense, explained, I. 374. Illustrated by a party at quadrille, id. 375. How to be excited, id. 378. Illustrated, id. 381. When it should be checked, id. 384. Foreign and domestic, to be distinguished, id. 389. How affected by the payment of a wrong balance of trade, II. 170. Comparative inquiry into the state of, among the ancients and moderns, II. 558.
Cities, the growth of, accounted for, I. 48. Described as under a feudal government, id. 51. In what respects advantageous to a country, id. 55. See Corporations.
Classes of mankind, the advantages of calculations and bills of mortality distinguishing them, I. 72.
Coin, new regulations for, proposed, I. 634. The term defined, II. 46. What the best form to be given to it, id. 67. Difference between, and medals, id. 67. Gold, silver, and copper, remarks on, id. 68. Never found to exceed the uses of circulation, id. 112. How the obligation of banks to pay in, arose, and the consequences of that obligation, id. 157. French, account of its variation about the time of the death of Louis XIV. id. 236. See Money.
Coinage, duty on, II. 2. Its first introduction must reduce the prices of commodities, id. 3. Consequences of the exclusive privilege of, id. 4. The price of, in France, id. 17. How the paying for, affects the profits on goods exported, id. 26. How it affects the profits on goods imported, id. 28. How it influences the prices of inland commodities, II. 33. Experiment in, proposed, id. 39. How the imposition of, will affect the creditors of Great Britain, id. 53. How it advances the credit of France, id. 54. Whether the imposition of, in England, would not frequently stop the mint, id. 57. When adviseable to impose a duty on, id. 29. How imposed, id. 30. By authority, id. 31. By consent, id. ib. The consequences, id. ib. id. 34.
Colbert, Mr. remarks on, I. 67.
Commerce, an examination of the various principles by which it is regulated, I. 191.
Commodities, in trade, what considerations enter into the fixing prices on them, I. 182. Consumable, distinguished from permanent property, id. 361. By what the prices of them are regulated, id. 528.
Companies, mercantile, an inquiry into the advantages and disadvantages of, I. 471.
Competition, its effect on trade, I. 196. Three questions relative to, id. 200. Among nations, its operation, id. 232. Among workmen, the nature of, examined, id. 317.
Conquerors, why the government of, heavy to be borne, I. 10.
Consumers and producers, their relation to each other, and the political balance between, considered, I. 264.
Consumption of productions of the earth, the question whether a frugal or prodigal one, be for the advantage of population, argued, I. 141.
Corn, difference between the price of it being lowered by plenty, and by importation, I. 292. Expedient proposed to assist a people during a scarcity of, id. 294.
Corn trade, general reflexions on, I. 214. On exportation and importation of, id. 230.
Corporations, reflexions on, I. 331. Whether checks upon industry, id. 332. Regulations of German ones, id. 333.
Corsicans, the real state of their contest with Genoa, I. 419.
Corvée, in the French revenue, what, II. 485. n.
Country, the love of, in individuals, how to be understood, I. 164.
Courage, where likely and where unlikely to be found, I. 452.
Credit, a definition of, II. 105. Why seldom found perfectly solid, under a pure monarchy, id. 106. Why that of France is so fluctuating, id. 106. Why that of Great Britain so well established, id. 107. Not yet fixed upon true principles, id. 130. The various kinds of, id. 141. Their characteristic differences, id. 143. The nature of, examined into, I. 365. Its commercial advantages, id. 366. Public, how the internal balance of wealth is affected by it, id. 370.
Credit, public, brief sketch of the birth and progress of, I. 208. The utmost extent of, how to be determined, II. 463. The rise and fall of, explained, id. 351. Of anticipations, or borrowing money upon assignments of taxes, for the discharge of principal and interest, id. 354. Of France, state of, before the death of Louis XIV. id. 367. A comparison between that of France and England, in the times of Richlieu and Davenant, id. 377. Of Great Britain, the present state of, id. 380.
Credit, private, the subdivisions of, II. 144. How to carry, to its greatest extent, id. 145.
Credit, debts and taxes, consequences of the change produced in the policy of industrious trading states, by the establishment of, II. 441.
Creditors, the interest of, always the predominant, and what determines the interest of a nation, I. 611. Public, the interest of, examined, id. 625.
Cumulative tax, the term defined, II. 500. See Tax.
Crop, plentiful, of Grain in England, inquiry what proportion it bears to the annual consumption, I. 109. Difference between a reputed good and bad one, id. 112.
D.
Davenant, Dr. his correction of Sir William Petty’s computations, I. 42. His scheme for land and poll taxes to raise the government supplies, inquiry into the expediency of, II. 362. His reasons for recommending the farming of taxes, id. 581.
Debts, public, the various consequences of, II. 348. The methods of contracting and paying off, id. 465. The two classes of, id. 473. The consequence which would result from an immediate discharge of them, id. 474. Of England, at the peace of Ryswick, what, id. 360. Progress of, traced, id. 381.
Demand, a definition of that word, in a commercial view, I. 172. High, and great, distinguished, id. 188. Distinguished from competition, id. 197, 487. The different acceptations of that word enumerated, id. 484.
Demand and work, an inquiry into the causes which influence an alteration of the balance between, I. 217. The duty of a statesman to assist and permit gentle vibrations between, id. 229.
Democracy, how it differs from monarchy, I. 242. How they affect trade respectively, id. 243.
Dependance, in society, three kinds of, distinguished, I. 238. On courts, the principles on which it subsists, analized, id. 357.
Depopulation, the most effectual causes of, I. 108.
Desertion, among soldiers, the cause of, pointed out, I. 136.
Diseases, political, certain sign of, I. 69.
Dissipation, the benefits of, to industry, I. 367.
Ducats, examination of the new regulation of, in Holland, I. 612.
Dutot, M. his sentiments on paper credit with reference to the affairs of France, II. 241, 245.
E.
Edinburgh, hints for the improvement of the banks there, II. 187.
England, the idleness and luxury of manufacturers, of more prejudice to its foreign trade, than the high taxes, II. 504.
England or France, which the most populous, I. 102.
Equality of possessions in a state, the consequences of, examined into, I. 367.
Estate, the difference between one near the metropolis, and one in a remote province, I. 55.
Evil, no such thing in the universe, I. 482. n.
Europe, the great revolution in the political system of, and the cause to which it is owing, I. 10.
Excess, import of that term, I. 308. Distinguished from sensuality and luxury, id. 311.
Exchange, the best measure for valuing currency, I. 570. How the course of it is regulated, II. 13, 21. Whether the loss which the course of it marks on the trade of Great Britain with France, be real or apparent, id. 25. The first principles of, id. 310. The difficulties which occur in paying balances, id. 315. How these payments are effected, id. 332. The operations of, between London and Paris, id. 335.
Exchequer, its circulation with the bank, explained, II. 225.
Excise, the accounts of, how settled between the exchequer and the bank, II. 226. When it first took place, id. 362. Its effects at that time, id. ib. In what the oppression of levying consists, id. 511. Defect of, and the ill effects arising, id. 512. Hints for remedying, id. 515.
Expence, the word defined, and the senses in which it is used, distinguished, I. 205.
Exportation, the proper means of encouraging, I. 283. Reflections on premiums for, id. 297. What the most profitable branches of, id. 341. The proper conduct when that of a nation is reduced to the articles of natural produce, id. 343. Why those manufacturers who work for, the poorest of those in a state, II. 10. Theory of the prices on articles of, id. 11.
F.
Fall of man, consequences of, shewn, I. 455. n. Conclusions drawn, on the supposition that it had not taken place, id. ib.
Feudal system of government, how departed from in the present forms, I. 10. Why taxes so little found under, id. 501. Subordination of the different ranks under, how founded, id. 240. Its influence on trade, id. 245.
Feudal governments, three remarkable stages, through which they have changed to the present forms, I. 356.
Fisheries, hints for the proper establishment of, I. 480.
Fleuri, Cardinal, his experiment to fix the par of exchange, II. 340.
Foreign ministers, political hint, as to their accommodations in the countries where they are sent to reside, I. 420.
Forestalling, why a crime, I. 200.
Forests, whether extended by an increase in the consumption of firewood, I. 145.
Foundling hospitals recommended, I. 75.
Foundlings, opportunity for providing for, pointed out, I. 287.
Fourage, in the French taxes, what, II. 496. n.
France, reflections on the state of agriculture in, I. 141. The progress of luxury in, compatible with the prosperity of her foreign trade, ib. 288. The principle on which the raising and sinking of the numerary value of the coin there in former times is accounted for, ib. 612. The policy of, with regard to its coin, why not easily understood, II. 32. Remarks on the currency of its coin, id. 58. Regulations of, with regard to coin, bullion, and plate, id. 70. Price of coinage there upon silver, id. 71. Ditto upon gold, id. 72. Proportion between a French grain weight to a grain troy, id. 73. Proportion between the louis and the guinea, id. 74. Advantages of the French regulations, id. 75. High price of bullion at Paris in 1760, id. 76. Present state of the wearing of the French silver coin, id. 77. Fluctuations of credit in, id. 106. Chronological anecdotes of banking there, id. 250. How its credit was destroyed in 1720, id. 284. How a bank may even now be safely established there, id. 289. State of their debts, funds, and appropriations, at the peace of 1763, id. 403. Extent of annual supplies of, from 1756 to 1762, id. 420. Courts of justice in, how rendered oppressive, id. 432. Method of levying the taxes in, id. 437. The nature of the taxes imposed there, explained, id. 496, 501.
France and England, which the most populous, I. 102.
Free gifts in France, as imposed in 1759, II. 419. n.
Freedom of a people, in what it consists, I. 237.
Frugality, the proper means of preventing the ill effects of, when it takes place in a luxurious state, I. 281.
Fund, sinking, the first foundation of, II. 385.
G.
Gabelle, in the French taxes, explained, II. 501, n.
Gardens, kitchen, why most frequently found in the neighbourhood of cities, I. 139.
Gee, Mr. remarks on his observations on the balance of the English trade, I. 431.
Germany, Remarks on the state of agriculture in, I. 91.
Governing, in what the art of, consists, I. 12.
Government, the republican form of, most favourable to trade and industry, I. 242.
Grain, inquiry into what proportion a plentiful crop of, in England, bears to the current annual consumption, I. 109. Inquiry into the difference between a plentiful year and a year of scarcity, id. 113. The price of, regulated by the abilities of the lowest class of people to purchase it, id. 401. The good effects which would result from preserving the price at some uniform standard, II. 509.
Greece, antient, remark on the disproportion between the prices of necessaries, and elegances in, I. 403. Accounted for, id. 439. Its treasures supposed equal to the mines of the new world, id. 437.
Guinea and louis, proportion between, II. 74.
Guineas, an examination into the consequences of bringing down their currency to twenty shillings, I. 583.
H.
Harris, examination of a passage in, concerning coin, I. 609.
Helots, their cruel treatment under the Spartan government, I. 254.
Henry VII. wise regulation of, for the preservation of bullion, II. 327.
Holland, the principles of its constitution inquired into, I. 214. Regulations observed in, with regard to coin and bullion, II. 78. Regulations of the Dutch mint, id. 79. How they reckon their silver standard, id. ib. Mint price of fine silver, id. 80. Price of coinage there, id. ib. Of the Dutch gold coins, id. ib. Mint price of fine Gold, id. 81. Price of coinage upon ducats, id. 82. The rider, id. ib. Utility of not fixing the denomination of ducats, id. 83. How to find the proportion of the metals in the coin of Holland, and a wonderful phænomenon in the value of ducats, id. 84. Quantity of fine silver in a florin piece, id. 85. Quantity of fine gold in a florin of riders, id. ib. Investigation of the proportion as to the ducat, id. ib. Proportion between the mint weights of Holland, England, France, and Germany, id. 87. Defects of the silver currency of Holland, id. 91. Frauds of money-jobbers there, id. 94. Reason of the apparent scarcity of silver coin there, id. 96. The great multiplication of taxes there, id. 529. Horses, whether the keeping a superfluous number in large cities, a public disadvantage, I. 145. Hume, Mr. examination of his doctrine concerning the influence of riches on the price of commodities, I. 398. Concerning the balance of trade, id. 416.
J.
Jacob the patriarch, an idea of primitive society, borrowed from the history of him and his family, I. 23. Janizaries, Turkish, and the Pretorian cohorts of Rome, parallel between, I. 247. Idle persons, the multiplication of, a load on society, I. 61. Jews, their law relating to interest, II. 112. The only money-lenders in Europe, until a commercial system prevailed, id. 113. Imitation, influence of the taste for, I. 280. Indies, account of the French company of, II. 247. Its revenue, id. 257. Industrie, in the French taxes, explained, II. 496. n. Remarks on this tax, id. 498. Industry, an inquiry into the effects of, I. 133. a definition of, id. 166. Distinguished from labour, id. ib. Why difficult to introduce in a country where slavery is established, id. 167. Whether the cause or the effect of trade, id. 170. How it is stimulated, id. 193. The difference between the progress of, in antient and modern times, accounted for, id. 193. Brief sketch of the progress and revolutions of, id. 207. A strong argument for a general exercise of, id. 210. The means of extending liberty to the lowest denominations of a people, id. 218. Flourishes best under a republican government, id. 242. Excluded by the system of Lycurgus, id. 258. The revolution it produces in the wealth of a nation, pointed out, id. 452. The proper direction of, hinted, id. 457. In what instance it destroys simplicity of manners, id. 459. Antient and modern, the difference of, shewn, I. 462. See Industrie.
Inhabitants, an examination into that maxim which asserts the number of, to be the riches of a country or state, I. 60.
Innovations, inconveniences attending, I. 632.
Interest, private, the proper spring of action in the individuals of a well governed state, I. 164.
Interest of money, how permitted under the Mosaic dispensation, II. 112. When it obtained in Europe, id. 113. Upon what principles the rate of, is regulated, id. 115. No statute for regulating in England, before the time of Henry VIII. id. 116. Different classes of borrowers, id. 117. Extortions in, how prevented, id. 118. Whether in the power of the legislature to command the rate of, id. 122. The lowering of, the rise of land, id. 123. Proper conduct of a statesman in relation to, id. 124. Probable consequences of reducing it below the level of the stocks, id. 125. A low rate most essential to states carrying on the most extensive foreign commerce, id. 129. Whether the rate of, a sure barometer of the state of commerce, id. 135. Whether it falls in proportion to the increase of wealth, id. 139. How affected by the manners of a people, id. ib. Ireland, the causes which influenced Great Britain to open her ports for the importation of provisions from, I. 231. Island, the progress of society illustrated, in a supposed one, I. 128.
K.
Kings, their rights not founded on tacit contracts between them and their people, I. 240. In the old feudal systems, more formidable abroad than at home, id. 356. Compared with the domestic influence of those under the present commercial systems, id. ib.
L.
Labour, the different obligations to, in antient and modern times, I. 59. How the methods of, are to be improved, id. 193. Land, the disproportion between the rents of arable and pasture, accounted for, I. 43. What the general raising of rents of land may be supposed to indicate, id. 45. Considerations on the taxes on, II. 561. No regular valuation of, made, since doomsday book, id. 564. The tax on, how levied in England, id. 565. What the most proper method of imposing a tax on, id. 577. Landed interest, examination into, I. 622. Landed men, inquiry whether they might not issue their own notes on the security of their land, without the intervention of a bank, II. 131. Landed property, the inconvenience of minute subdivisions of, I. 85. Inquiry into the expediency of the equal distribution of, id. 124. Landholder and stockholder, how comparatively affected by taxation, II. 448. Land tax in Scotland, defect in, II. 497. Law, Mr. account of the establishment of his bank, II. 235, 239. Laws, none really invariable, in any government, I. 7. Levity, remarks on the influence of, in luxury, I. 280. Liberty, public, in what it is understood to consist, I. 237. Capable of subsisting under despotic forms of government, id. ib. Liberty, universal, established in Europe, and the consequences of, I. 70. Linen manufacture, by what means it has been augmented in Scotland and Ireland, I. 86. Loans upon interest, if deemed unlawful in a religious view, expedient to avoid, I. 370. Locke, Mr. mistake of, corrected, in relation to a proposed alteration of silver coinage, I. 554, 602. Lotteries, the advantage of, to the government, II. 400. n. When only proper to be used for paying of public debts, id. 479. Lowndes, Mr. examination into the present propriety of his scheme for regulating the coin in 1695, I. 602. Luxury, the term defined, I. 31, 307. The parent of public distress, ib. 212. In what instance to be encouraged, ib. 263. This farther explained, id. 276. How to be effected, id. 277. Changes in the modes of, ever distressing to manufacturers, id. 280. Political improvement of this circumstance, id. ib. The interests affected by, id. 307. The mind, id. 308. The body, id. 309. The fortune, id. ib. The state, id. ib. Its different effects on different antient nations, remarked, and accounted for, id. 324. Its effects in modern times, id. 325. Prejudicial to courage, id. 452. Modern, the cause of, hinted, id. 462. Lycurgus, the tendency of his laws to encourage population, shewn, I. 70. Why there was no industry in his republic, id. 193. His republic the most perfect plan of political œconomy, id. 250. His laws transmitted by tradition only, id. 251. The sanction he obtained for them, id. ib. His regulation of property, id. 252. Cloathing, id. 253. The cruel treatment of the helots, id. 254. His plan of education, id. 255. Remarks on the austerity of his institutions, id. 256. His care to guard against the Spartans having an intercourse with foreign nations, id. 257. Conclusions drawn from a supposed adoption of his system by any modern nation, id. 259.
M.
Machines, the introduction of, into manufactures, whether hurtful or beneficial to a date, I. 119, 295. Mankind, in what respect alike in all ages, I. 6. The distribution of their residence in a country, how determined, id. 46. Their number in a free country, in the ratio of their food, id. 113. Manners of a people, national peculiarities in, noticed, I. 8. The simplicity of, how it affects population, I. 36. Manufactures, the principles which determine the residence of, I. 49. Their flourishing or decaying in particular places, accounted for, id. 182. The proper method of lowering the prices of, to render them vendible at foreign markets, id. 283. Why particular ones cannot be furnished so cheap at home, as by other countries, id. 284. The importance of their being properly situated, id. 289. Manufacturers, why those who work for exportation are the poorest, II. 10. More hurt by their own idleness and extravagance than by taxes, id. 505. Markets, public, their great use in trade, I. 180. Marriage, political considerations on, I. 71. Master, his right to share in the profits of his journeymen, proved, I. 318. Maxims, general ones, the danger of adopting, I. 60. Medals and coin, the difference between, II. 68. Megens, Mr. his sentiments concerning the coin of the bank of England, II. 158. Melon, M. de, his remark on the proper qualifications of a statesman, I. 377. Merchant, observations on the profession of, I. 177. Metal, the term defined, II. 46. Why a scale of value realized in, can never be exact, ib. id. 54. How the proportion of those in coin, is kept nearly the same in all European markets, id. 62. Why this proportion so different between Europe and Asia, id. 63. How to determine the true intrinsic value of those in which a balance to foreign nations is to be paid, id. 316. How to remove the inconveniences which occur in such payments, id. 325. Metropolis, the growth of, accounted for, I. 48. A large one, whether disadvantageous to a country, id. 52. Militia, reflections on, I. 136. Mind, the effects of luxurious gratifications on, I. 308. Minot, a French measure, what, II. 576, n. Mint, French unit of weight in, II. 70. Weights of Holland, England, France, and Germany, proportion among, id. 87. Missisippi bank of France, account of the establishment of, II. 243, 252, 265. Inquiry into the motives for its plan, id. 256. Not intentionally a bubble, id. 263. How the failure might have been prevented, id. 276. How the credit of France was destroyed in May 1720, id. 284. Modesty, reflections on, with reference to the Spartans, I. 258. Monarchy and democracy, compared, I. 242. Their different influences on trade, id. 243. Monasteries, magnificent ones, how advantageous to a country, I. 468. Money, the term defined, I. 32. How to be procured, id. ib. The plenty of, productive of luxury, id. 33. The effects of the introduction of, on trade, id. 176. Observations on that of Sparta, id. 259. An inquiry into the principles of the circulation of, id. 360. Real, and symbolical, what, id. 364. Illustrated, id. 381. Ready, caution necessary in taxing it, id. 387. No real and adequate proportion between, and goods, id. 394. In countries of simplicity, id. 395. In countries of industry, id. 397. Paper, whether advantageous to a nation, id. 408. Whether a tenfold increase of, in Europe, would raise the prices of commodities in the same proportion, id. 413. Whether any judgment can be formed concerning the balance of trade of a nation, barely from the quantity of specie that is found in it, id. 429. The dissipation of by individuals, not expedient to be checked, id. 471. Defined, id. 526. A scale for measuring the value of things, id. ib. On what principles the value of things is determined, id. 527. The prices of things not regulated by the quantity of, id. ib. Necessity of distinguishing between, and price, id. 529. Of account, what, and how contrived, id. ib. Bank, id. 531. Angola, id. ib. Usefulness of the precious metals in making, id. 532. Standard, how to be adjusted, id. 533. Debasing and raising a standard, what, id. 534. Alteration of the standard, how to be discovered, id. ib. Of alloy, id. ib. Incapacities of metals to constitute invariable measures of value, id. 535. The obligation of such measures to be invariable, id. ib. Consequences of their variation, id. 536. Defects of a silver standard, id. 537. Arguments in favour of a silver standard, id. ib. Answers to those arguments, id. 538. Usefulness of an universal measure, id. 539. Why metals incapacitated from performing the office of, id. 540. Wearing in circulation, id. ib. Inaccuracy in coining, id. 541. Coinage adding to the value, without adding to the weight, id. ib. The smallest defects of, profited by in trade, id. ib. Five remedies against the effects of the variation in the value of metals, id. 542. Remedies against other inconveniences, id. 544. Remedies against the wearing of coin, id. ib. Remedies against inaccuracy in coinage, id. ib. Remedies against the expence of coinage, id. ib. Remedies against arbitrary changes in the value of coin, id. 545. How the market price of the metals is made to vary, id. ib. The variation to be referred to the rising metal, not to the sinking, id. 546. Of account, how made to vary in its value, from the variation of the metals, and the consequences, id. 547. What the mean proportional between the value of the metals, id. ib. The unit to be attached to the mean proportion, upon a new coinage, not after the metals have varied, id. 548. The unit better to be affixed to one metal than to both, id. 549. To what variation the unit is exposed, from the wearing of the coin, id. ib. To what variation the unit is exposed, from the inaccuracy in the fabrication of coin, id. 550. Variations to which the unit is exposed, from the imposition of coinage, id. 551. When coinage imposed, bullion cheaper than coin, id. ib. Exception, id. 552. Variation to which the unit is exposed, from the arbitrary raising and debasing the coin by Princes, id. ib. How this variation affects the interests of debtors and creditors, id. 553. A mistake of Mr. Locke in relation to, corrected, id. 555. Defects in the British coinage, id. 558. Of the standard of English coin and money unit, id. ib. Coinage free in England, id. 559. The standard, when attached to the gold coin, id. 560. Consequences of that regulation, id. ib. Silver, sometimes considered as a money of accompt, id. 561. Jobbers in, their practices explained, id. 562. 565. Why silver bullion is dearer than coin, id. ib. What regulates the price of bullion, id. 564. The intrinsic value of the currency, id. ib. Paper, the use of, not hurtful in debasing the standard, id. 571. The standard how shewn to have been debased, id. 574. Proof that the standard has been debased by law, id. 575. The standard at present reduced to the value of the gold, id. ib. How the disorder in the coin may be remedied without inconveniences, id. 576. If the present standard be departed from, all other arbitrary, id. 577. The present standard not the same with that of Queen Elizabeth, id. 578. Anecdotes of its alterations, id. ib. Debasing the standard, chiefly affects permanent contracts, id. 581. Why silver so scarce, id. 583. Consequences of fixing the guinea at twenty shillings, id. ib. How to fix the pound sterling at the standard of Queen Elizabeth, id. 587. The consequences of this reformation, id. 588. Sufferers by the debasement of the standard, have a right to redress, id. 590. But not the whole class of creditors, id. ib. Whose claim ought to be liable to conversion, id. 591. Objections against the principles before laid down, id. 593. Answers to them, id. 595. Upon whom the loss incurred by the wear of it, falls, id. 598. Inland dealings not able to support the standard where there are money-jobbers, or foreign commerce, id. 599. Public currency supports the authority of the coin, not the value of the pound sterling, id. 601. In what sense the standard debased by law, and in what sense by the operation of other political causes, id. 614. The payments made by bankers regulate all other, id. 615. Regulation proposed for the coin, id. 634. The first introduction of coinage must reduce the prices of commodities, II. 3. Why the doctrine of money appears so intricate, id. 45. The difference between raising the value of coin by imposing coinage, and raising the denomination of it, id. 50. Whether it is the interest of England to debase the standard of, id. 64. The borrowing of, for carrying on trade, more relative to the merchant than the manufacturer, id. 137. Montesquieu, Mr. examination of his doctrine concerning the influence of riches on the prices of commodities, I. 398. Multiplication of people, the three principles of, I. 90. Whether the efficient cause of agriculture, or agriculture of multiplication, id. 114.
N.
Nation, every interest in, intitled to protection, I. 589. Nations, trading, compared to a fleet of ships, I. 233. Navigation, remarks on the consequences of the act of, in England, I. 343. Naturalization of strangers, ineffectual in the view of lowering the prices of manufactures, I. 290. Necessaries, an inquiry into the cause of a rise in the prices of, I. 291. Physical and political, distinguished and explained, id. 312. The consumption of, how to be ascertained, id. 314. And superfluities, vague terms when different ranks of people are compared, id. 258. Netherlands, Austrian, the cities of, in a state of depopulation, and the reason, I. 334. n. Nobility, the advantages of a numerous one, to a state, I. 63. Why their spirit ought to be preserved, id. ib. Their behaviour in the field compared with that of traders, id. 64. Poor, reflexions on their situation, id. ib.
O.
Oeconomy, general definition of, I. 1. Family and political, distinguished, id. 2. Political, when brought to perfection, id. 83. Ounces, different, a comparison of, II. 323. n.
P.
Padua, observations on the soil and produce of the country round, I. 140. Paper money, how realized, II. 110. Paris, remarks on the state of agriculture round, I. 139. Partisans in France, what, and cardinal Richlieu’s sentiments on their conduct, II. 369. Their extortions, why not then to be remedied, id. 370. The present regulation of them, id. ib. Pay of the soldiery, political plan for the regulation of, I. 449. Payments, those made by bankers regulate all others, I. 615. Petty, Sir William, his computations of the number of inhabitants and consumption of provisions in England, I. 41. Population, how limited, I. 18. 113. What the most essential requisite for, id. 25. Reflexions on the best means for promoting, id. 72. Inquiry into the state of, in Great Britain, I. 95. Antient and modern, politically considered, id. 125. Populous, inquiry into the meaning of this word, when affirmed of a country, I. 102. Populousness of antient nations, inquiry into the question concerning, I. 38. Posts for the conveyance of letters, their great use in commerce, I. 180. Pound sterling, two legal ones in England, I. 568. Current value of, id. 569. How determined, id. 570. What the good measure of, id. 1 The value of, how marked by bullion, id. 571. How to fix it at the standard of Queen Elizabeth, id. 587. The consequences of this reformation, id. 588. Premiums on exportation of commodities, reflexions on, I. 297. Prerogative, regal, often arbitrarily exercised, from a view to establish public liberty on a more extensive bottom, I. 248. Price, what understood by, II. 46. Prices, how regulated on necessaries and on superfluities, I. 440. The rise of, on articles of home consumption accounted for, II. 9. How kept down on articles of exportation, id. 1 Princes, how those who incline to rob their subjects may avoid robbing themselves at the same time, II. 65. Producers and consumers, an analysis of the principles which influence the alterations in the political balance between, I. 264. Profit and loss, explained and distinguished, I. 206. Profits, how they consolidate into prime cost, II. 8. Consolidated, the ill effects of, and how to remedy, I. 289. Property, how regulated under the Spartan government, I. 252. Inconsumable, what, I. 360. Consumable, what, id. 361. Consequences of the alienation of both kinds, id. 1 Incorporeal, id. 369. Landed and monied, the different ways of life of the possessors of each compared, II. 478. n. Permanent, the expediency of its contributing to the burdens of the state, I. 387. Solid, how understood, II. 149. Provisions, those produced in most countries, nearly consumed by the respective inhabitants, I. 109. The consequences of an augmentation in the value of, I. 226. Public money, heinous nature of all attempts to defeat the application of, I. 297. Public spirit, an improper principle of action in the governed, I. 164. Public works, not the produce of the wealth of a nation, I. 464.
Q.
Quadrille, the idea of circulation of wealth in a state, illustrated by the game of, I. 375.
R.
Rank, the obligation individuals are under to uphold that which they have once attained, I. 313. Remuage, in the French duties, explained, II. 550 n. Revenue of England, at the revolution, its amount, II. 364. State of, at the accession of Queen Anne, II. 381. Riches, an inquiry into the effects of, before the introduction of trade and industry, I. 437. Richlieu, cardinal, his sentiments on the public credit of France, II. 367. His sentiments of the extortions committed by the farmers of the French taxes, id. 369. Why not capable of being remedied at that time, id. 370. His scheme for payment of the public debts, id. 372. Roads, the advantages of good ones to a country, pointed out, I. 57. The making and improving of, shewn to have a tendency to destroy simplicity of manners, I. 459. Romans, ancient, reflexions on the agriculture of, I. 88. The consequences of their subduing the Grecian states, id. 439. Rome, antient, remarks on the disproportion between the prices of necessaries and elegances in, I. 403. Accounted for, id. 439. Consular and imperial, its ornaments compared, id. 457.
S.
Scotland, remarks on the state of agriculture in, I. 103. Similar instances in other parts of Europe, id. 105. Accounted for, id. 106. Remark on the variation of the price of oatmeal in, id. 403. The nature of banking there, II. 155. 179. 184.
Security, real, what, II. 144.
Self-interest, its extensive influence and use, in a political view, I. 162.
Sensuality, the term distinguished from those of luxury and excess, I. 311.
Silver, in coin, the scarcity of, to what owing, I. 547. 558. 583. Why exported preferably to gold, id. 567. Why any remains in England, id. 569. Rising in value, id. 1 The rising of, the debasement of the standard, id. 616. Question relating to the scarcity of, in England, II. 61.
Simplicity of manners, shewn to be relative, I. 456.
Slavery, the origin of, traced, I. 22. Its effects on the multiplication and employment of mankind, id. 36. Whether industry can be introduced in a state where the former is established, id. 168. Its operation in America, id. 169. Real, preferable to a nominal liberty, id. 244.
Society, primitive, an idea of, illustrated in the history of Jacob the patriarch, I. 23. Reflexions on the present state of, compared with remote times of primitive simplicity, id. 69. The best bond of, id. 84. The best principle on which it is to be governed, id. 163.
Societies, human, in what respects they all agree, I. 6.
Soil, a rich one, its disadvantageous effects on the inhabitants of it, traced, I. 34. Why less fruitful countries flourish most, id. 35.
South-Sea-scheme, comparison of, with that of the Missisippi, II. 387. n.
Spain, remarks on the state of husbandry there, I. 89. On the depopulation of, id. 107.
Spartans, how prevented from having an intercourse with foreign nations, I. 257. Their modesty, id. 258. The only articles of trade among, id. 1 Observations on their money, id. 259. Conclusions drawn from a supposed adoption of their system by any modern nation, id. 1 See Lycurgus.
Spirit of a people, whereon formed, I. 8.
Standard of English coinage, remarks on, I. 558. When attached to the gold coin, id. 560. How shewn to have been debased, id. 574. Not the same now with that of Queen Elizabeth, id. 578. Anecdotes of its alterations, id. 1 The debasing of, shewn chiefly to affect permanent contracts, id. 581. In what sense debased by law, and in what sense, by the operation of political causes, id. 614. Of Elizabeth, its advantage over that of Mary I. id. 621. Alteration of, how it affects different interests, id. 632. A more easy method of making a change in, proposed, id. 633. Whether it is the interest of princes to debase, II. 64. The proper arguments against it, id. 67.
Standing armies, the nature and use of, explained, I. 442. The consequence of trade and industry, id. 445. The history of, id. 446.
State, how to preserve a trading one from decay, I. 224. Every change in, advantageous to some class or other, id. 428.
Statesman, the term defined, I. 149. 151. Modern, his extraordinary influence and advantages, beyond those of former ages, id. 321. The criterion of his abilities, id. 377. His actions not to be estimated by the rules of private morality, id. 482.
Stews, public, how far expedient, I. 386.
Subordination, how produced in society, I. 21. Political, explained and distinguished, id. 238. The boundaries of, deduced, id. 242. Wherein that which now subsists in trading nations differs from that which obtained under the old feudal systems, id. 248. Superfluities, domestic competition in the manufacture of them, to be discouraged, id. 271.
T.
Taille, in the French taxes, explained, II. 496. n. Tariffee, in the French taxes, explained, II. 498. n. Taxes, general reflexions on, I. 13. From what principle the imposition of them is justifiable; and the proper application of them, id. 269. The proper use of, in regulating the several articles of trade, to suit temporary circumstances, id. 321. Why the right of imposing, scarcely any where attached to royalty, id. 335. The plan of, under pure monarchies, and under limited monarchies, compared, id. 353. The necessity of, under a decay of foreign trade, id. 354. Their internal effects on the people, id. 371. Their operation on industry, id. 385. The expediency of distinguishing raisers and consumers in, id. 388. To be regulated by the proportion between foreign and domestic circulation, id. 390. Only a liquidation of the antient personal services, id. 442. History of, id. 443. The perpetuity of, argued, id. 445. The consequences of a total cessation of, II. 461. The word defined, and the various kinds of, specified, id. 484. The various objects of, or funds for taxation, id. 486. Proportional, affect only the idle, id. 488. In what manner they raise the price of commodities, id. 493. Where they ultimately fall, id. 494. Cumulative, what, in England and in France, id. 496. The height of, in England, not so prejudicial to its foreign trade, as the idleness and luxury of manufacturers, id. 504. Proportional, their effects, id. 507. Good method of raising, id. 514. Cumulative, the nature of, explained, id. 518. Compared with proportional, id. 520. How a cumulative tax is convertible into a proportional one, id. 1 Consequences of, when the amount is properly applied, id. 523. Of the extent of taxation, id. 527. The hardship of, in those instances where no alienation takes place, id. 530. The difficulty of establishing, upon barter, id. 1 Draw an additional sum of money into circulation, id. 531. The extent of cumulative taxes, id. 538. Method of ascertaining the value of landed property, id. 539. Impossibility of establishing, upon the income springing from money, id. 1 Interest of a whole people considered with respect to, id. 542. Consequences of abolishing taxes relative to the cumulative interest of a whole state, id. 543. Consequences of such abolition, to those who are fed by the produce of taxes, id. 546. Judiciously imposed, and equitably levied, enrich a nation, id. 554. Whether they promote industry, id. 556. Upon land, considerations on, id. 561. On land, how levied in England, id. 565. What the most proper method of imposing, on land, id. 577. What the best method of levying, generally, id. 579. On land, whether possible to be converted into one of the proportional kind, id. 592. Taxation, why so little found under feudal governments, I. 50. Temple, Sir William, his symbolical representation of a flourishing state, I. 71. Theft, why encouraged by Lycurgus among the Spartans, I. 257. Theory, reflexions on the benefit of, in the arts, I. 67. Its use, in political researches, id. 542. Not exactly confirmed by experience, and why, II. 8. And practice, remarks on the difference between, in political subjects, I. 298. Tithes, under what species of taxation to be ranked, II. 497. The most oppressive kind of tax upon landed property, id. 568. Trade, its beneficial tendency traced, I. 118. A definition of, id. 166. Whether the cause or the effect of industry, id. 170. The progress of, traced, id. 175. A republican form of government, and those which approach nearest to it, most favourable to, id. 242. Its influence in creating national connexions, id. 266. Its natural, division, id. 301. Infant, by what means, to be encouraged, id. 302. Foreign, the ruling principles of, id. 304. Inland, as supposed to take place on the extinction of foreign trade, id. 305. Inquiry into the expediency of laying it open, id. 424. Natural consequences of it, id. 425. The interest of, examined, id. 628. Trade, inland, how it may be made a resource on the decay of foreign, I. 319. Trade, foreign, passive and active distinguished, I. 184. The progress of, traced, id. 185. Illustrated, id. 191. An examination of the principles on which it may be established and preserved as long as possible, id. 267. On what it is founded, id. 273. Inquiry into the causes of the decay of, id. 278. The proper remedies proposed, id. 279, 319. Its extensive uses, id. 326. The proper remedies in cases of successful rivalship in particular articles of it, id. 328. How to put a stop to it in manufactures, when the balance of it turns against a nation, id. 336. Cautions against hasty measures in such instances, id. 338. The natural consequences which will result upon the cessation of it, id. 350. Trading nation, the true policy of, I. 262. Traittes, in the French taxes, explained, II. 501. n. Troops, foreign, how they become necessary to a state, I. 449. Plan to supersede the necessity of, id. 450.
V.
Value, the exact scale of, what, II. 55. Vauban, Marechal, observations on his scheme of raising the land-tax in France, II. 562, 567. Vice, the proper method of checking, among a people, I. 386. Vineyards, reflexions on the political tendency of, I. 88. Visa, the nature of that commission explained, II. 376. Ustencil, in the French taxes, what, II. 496. n.
W.
Wants, reciprocal, the political use of, among a people, I. 28. War, all history full of, I. 448. The different methods of raising the supplies for, by the different powers of Europe, II. 371. n. Wealth of a nation, the ill consequences of its remaining in few hands, I. 26. Of antient nations, how differently acquired, id. 324. Natural consequences of its being withdrawn from foreign trade, to domestic circulation, id. 351. Whether to be estimated by the quantity of coin in it, II. 42. The last sacrifice a statesman ought to make in cases of emergency, I. 339. Observations on that of a trading nation, id. 355. Two kinds of circulation of, in a state, id. 373. Weights in different places, the uncertainty of, shewn, II. 323. n. Wood, whether an increase in the consumption of, for firing, a public disadvantage, I. 145. Wool, inquiry into the principles which operate in regulating the trade in, I. 274. Woollen manufacture, by what means it has been augmented in England, I. 86. Words, synonimous, observation respecting, I. 310. Work, an examination into the alterations of the balance between, and demand, I. 217. The proper means of lowering the price of, when increased by the augmentation of the value of subsistence, id. 227.
X.
Xenophon, his plan for the proper employment of the Athenian people, I. 460.
FINIS.
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The reader is desired to correct the following errors, especially such as are distinguished by an asterisk *, which pervert the sense entirely.
ERRATA.
Page. Line. 2. 8. of, r. as 7. 2, 7. manufactures, r. manufacturers 9. 32. their grains, r. their gains 71. 26. * 55.162, r. 51.162 73. 13. * 801.61, r. 801.68 82. 4. * 1½, r. ½ 85. 15. * 24.572, r. 25.572 87. 1. * price, r. piece 93. 15. * 1201.26, r. 120126 118. 16. this, r. the 119. 18. * seems, r. comes 132. 32. * considerable, r. inconsiderable 143. 27. case, r. ease 149. 9. property, r. prosperity 152. 24. that, r. their 156. 4. advance-profits, r. advance; profits 157. last. dele, back. 158. 17. dele, the 160. at the end, add, * severely felt. 168. penult. * of, r. to 182. 26. * brought, r. bought 197. 15. * no, r. the same 249. 3. last, r. East 254. 13. * 5000, r. 500 261. 15. he, r. the 326. 9. * exportation, r. importation 333. 23. * bills to, r. bills on 344. 16. exchange-property, r. exchange 369. 21. * mixed, r. raised 394. 12. * determinate, r. indeterminate 406. 14. after King’s library, add, and archives of France. 411. 24. * 1762, r. 1744. 429. last. 4 444 444, r. 14 444 444
N. B. In page 182. line 10. for quarterly, read half-yearly, and then the note at the bottom of the page may be struck out.
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Transcriber’s Note
The last numbered page is p. 646. It is followed by a large table, and the index, which are not paginated. These have been assigned page numbers, continuing from ‘646’ for ease of reference here. The Index was printed in two columns, but is given here in a single column.
Several long accounting tables employ ‘Carry over’ and ‘Brought over’ lines to bridge page breaks. These are no longer required, and have been removed.
Spelling, generally, is not ‘corrected’, given the age of the text, unless there is a clear preponderance of an alternate more standard spelling. ‘Knowledge’ appears three times as ‘knowlege’, but more than twenty times as ‘knowledge’. Verbs ending with -er (‘enter’, ‘render’) are frequently spelled without the ‘e’ when used in other tenses, as ‘entred’, ‘rendring’, etc.
The word ‘Missisippi’ appears as the modern variant ‘Mississippi’ in the table of contents and index. The two instances (pp. 243, 261) in the text proper have been retained.
Diacritical marks in non-English languages are frequently missing, and have not been added.
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Indexing Issues
No attempt was made to validate all the references in the Index. Several issues did arise during the preparation of this transcription:
The entry for ‘Remuage’ is corrupt, indicating a note on p ‘50?’. The note now appears as note 46 on p. 550.
The entry for ‘Ustensil’ misspells the word ‘Ustencil’, and transposes the last digits of the correct page number (‘496’) as ‘469’.
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Errors deemed most likely to be the printer’s have been corrected, and are noted here. The references are to the page and line in the original. The following issues should be noted.
The changes requested in the Errata table above have also been made, and are marked with an asterisk. The brackets show the specific change made to the line. The editor’s final request
2.8 * [of/as] affecting Replaced. 7.1 * manufacture[r]s Inserted. 9.32 * their g[r]ains will purchase Removed. 15.26 Is not this called par[./?] Replaced. 66.15 a[n/u] cours du jour Replaced. 71.26 * 5[5/1].162 : 55.38 :: 100 : 108.2. Replaced. 73.13 * 801.6[1/8] :: 1 : 14.47 Replaced. 77.13 23 mar[k/c]s 7 ounces 152 grains Replaced. 77.22 23 mar[k/c]s 7 ounces 152 grains Replaced. 85.15 * f. 2[4/5].572 in silver florins Replaced. 86.9 [i/I] this case Capitalized. 87.1 * the weight of the p[ri/ie]ce Replaced. 93.15 * 1201[.]26 aces fine Removed. 93.17 263 : 12012[0/6>] Replaced. 103.23 to shew how eve[ry/n] the most surprizing Replaced. effect 118.16 * 26th chapter of th[is/e] second book Replaced. 119.18 * hen a state [seems/comes] to contract Replaced. 132.32 * at a very [in]considerable interest Added. 143.27 * [c/e]ase of transfer Replaced. 149.9 * depends the pro[per/speri]ty of trade Replaced. 152.24 * in security of th[at/eir] good faith Replaced. 156.4 * of their advance[-/;]profits[,] Replaced./Removed. 157.26 * are quickly thrown[ back] into circulation Removed. 158.17 * searching after[ the] principles, not after Removed. facts, 168.31 * What are the consequences [of/to] circulation Replaced. 182.26 * these bills will be b[r]ought from Removed. 197.15 * and pay [no/the same] interest Replaced. 249.3 * the [l/E]ast India company Replaced. 254.13 * upon the value of 500[0] livres Removed. 261.15 * If that was [t]he case Added. 326.9 * for articles of [ex/im]portation Replaced. 333.23 * he will sell his bills [to/on] the country Replaced. 344.16 * in regulating exchange[-property]. Removed. 368.19 far beyond [t]heir due proportion Restored. 369.21 * when taxes were [mixed/raised] Replaced. 394.12 * perpetual or [in]determinate annuities Added. 406.10 * library[ and archives of France] Added. 411.24 * during the war 17[62/44] Replaced. 469.5 the whole [t]he> lender Restored. 524.24 extrava[va]gance of your neighbour Removed. 588.5 exportation and importa[ta]tion Removed. 608.20 their own debt[) / (']and it is so, Reversed. 613.6 and the fatal catastrop[h]e Inserted. 627.21 In order to make [t]his change of policy Added. 646.29 no farther knowle[d]ge Inserted. 659l.22 Usten[s/c]il Replaced.